Prepayments on mortgages should slow in the next few months, according to a report by PaineWebber Inc.

"The market's continued low volatility has calmed prepayment concerns among MBS (mortgage-backed securities) investors and - barring a sustained rally - justifiably so," the report said.

October prepayments are not expected to change much from the September level, and declines thereafter are expected "as we move into the holiday season," PaineWebber said.

The report said the main determinant of prepayments in the present environment was home resales, which are seasonal. The normal slowing because of the holiday season should be the major influence.

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