The MBA’s mortgage application index numbers are out this morning. Refis appear to have fallen off a cliff, down more than 6 percent versus one week ago, while purchase apps eked out slightly more than a 1 percent gain:

The Refinance Index decreased 6.3 percent to 1757.1 from 1874.6 the previous week and the seasonally adjusted Purchase Index increased 1.5 percent to 433.6 from 427 one week earlier. The seasonally adjusted Conventional Index decreased 1.5 percent to 920.6 from 934.8 the previous week, and the seasonally adjusted Government Index decreased 4.3 percent to 132.8 from 138.7 the previous week.

Not that this should be news: with mortgage rates going up, up, up and no interest rate relief in near sight, refinancing isn’t exactly an attractive option right now. That should slow prepayments, lessening portfolio run-off for bond investors – which gets me to thinking if this won’t at least help the secondary markets a bit. (After all, most of what I’ve seen suggests a steady to rising interest rate environment for the rest of 2007.) That is, of course, if a concomitant increase in default risk isn’t swamping the apparent decrease in prepayment risk.