Increasing interest rates will slow prepayments resulting in extending the maturity of the passthrough. This reduces the amount available to be invested at the currently high interest rates.

A decrease in interest rates will give borrowers an incentive to prepay the loan and refinance the debt at a lower rate. Therefore, the maturity of the passthrough will contract. The second adverse consequence is that the cash flows resulting from prepayments have to be reinvested at a lower interest rate.

Reinvestment rate risk is a result of falling interest rates, not rising rates.

The amount of overall mortgage activity does not impact prepayments.