After popping up eight basis points last week after holding at a record low 3.87% for three weeks, 30-year fixed mortgage rates declined five basis points to 3.90% for the week ending March 1, according to Freddie Mac's survey.

The 15-year fixed rates eased two basis points to 3.17%, while one-year ARMs averaged 2.72% compared to 2.73% previously. Only 5/1 hybrid ARMs were higher at 2.83%, a three basis points increase over the week.

Rate levels should keep the Mortgage Bankers Association's Refinance Index above 4000, but unlikely to push back to 2012's high of 4500 area.

Capacity constraints at mortgage bankers, as well as, poor home valuations and tight credit standards continue to limit refinancing activity.

For the month of January, the 30-year fixed mortgage rate averaged 3.89% compared to 3.92%. The slight improvement in rates has contributed to a modest uptick of 7% on average in refinancing activity over the month through last week. The effect of this will begin to show in March prepayments (released in April).

Speeds on 30-year MBS are projected to increase around 6%-7% on average in February from January, while March records additional strengthening of 10%-15%.

The gain is on a combination of seasonals, Home Affordable Refinance Program as well as the rush by originators to close loans before the 10 basis points g-fee increase goes into effect on April 1.

Meanwhile, April speeds slow around 2%-3% as the number of collection days drops to 20 from 22 in March.

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