As interest rates increase, the value of outstanding expanded-credit MBS declines. Investors are responding by demanding higher spreads for new issuance, putting pressure on issuers.

In a high-rate environment, debt service coverage ratios determine the size of an agency refinance. Those loans may not be large enough to cover the inflation-driven debt of many multifamily properties.

Interest rates on mortgages increased steadily throughout the second quarter, diminishing demand among non-agency MBS investors to some extent. (Includes data table.)