Freddie Mac reported 30-year fixed-rate mortgage rates fell to 4.98% from 5.03% last week.

This is the first time since mid-January since rates were below 5%. As rates moved below 5% at that time the Mortgage Bankers Assocaition Refinance Index surged to 7414.

In other programs, 15-year fixed mortgage rates slid three basis points to 4.61% and five-year hybrid ARMs were off just one basis point to 4.98%.

Meanwhile, one-year ARM rates jumped 11 basis points to 4.91%.

In response to the Federal Reserve's plan to buy up to $300 billion in longer Treasurys and a total of $1.25 trillion in agency MBS. On the impact of the Fed's move on rates, Credit Suisse analysts expect primary mortgage rates will decline to 4.63%. However, they believe the primary/secondary spread will widen around 20 basis points in the near term due to originator capacity issues. Longer term spreads should tighten back as capacity issues are resolved, they added.

At any rate, mortgage application activity is expected to steadily gain on the combination of improving mortgage rates and the GSEs refinancing program. Yesterday, the Mortgage Bankers Association reported a 30% jump in the Refinance Index for the week ending March 13 to 4498.

The Purchase Index was less response, increasing just 1.5% to 257.1. While this year offers an $8,000 tax credit for first time homebuyers, on top of top of attractive mortgage rates, buyers may choose to wait until later this year — especially as the Fed is trying to lower mortgage rates.

In a recent report from Barclays Capital on housing, the firm's analysts noted "the decision to purchase a home is driven by expected returns on the investment", and at this time the trend looks to be negative.

In fact, the analysts downgraded their forecast on home prices to fall another 20% from the end of last year from a previous expectation of negative 15%. They don't expect home prices to bottom until the end of next year.

"Once home price depreciation slows, homebuyers may begin to enter the market once again," they wrote.

This as well as other factors such as credit availability and consumer confidence suggests to Barclays that the spring selling season will be in their analysts' words "dreadful."

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