Understanding CPR: a key value driver for mortgage investors
Conditional Prepayment Rate (CPR) plays a crucial role in mortgage portfolio valuation, cash flow forecasting and risk management. Our analysis of Dutch mortgage vintages since 2016 reveals how interest rate incentives and mortgage seasoning shape prepayment behaviour.
It also highlights a structural level of prepayments that persists even when refinancing is no longer economically attractive. In this paper, we explore what these findings mean for portfolio valuation, duration, reinvestment risk and investment strategy.