The flight to safety as a result of the crisis in Japan sent mortgage rates tumbling in the week ending March 17.

Freddie Mac reported 30-year fixed mortgage rates fell 12 basis points to 4.76% with an average 0.7 point, its lowest level since mid-January. This places the no-point rate in the 4.94% area, which should contribute to a boost in refinancing activity as more 5% coupons come into the refinancing window. 

Credit Suisse analysts estimated it would take a mortgage rate of 4.50% to trigger a significant increase in speeds. 

For example, analysts projected speeds increasing to 16 from 9 CPR for 2009 4.5s as mortgage rates decline to 4.75% from 5% and to 24 CPR at a 4.50% rate. 

For 5% coupons, they estimated speeds increasing just 3 CPR to 18 at 4.75% and to 31 CPR at 4.50%.  

While an increase in refinancing activity will result from the rally, the factors that are limiting activity include higher g-fees, mortgage banker capacity constraints that make the primary-secondary spread less responsive, reduced competition, and other costs associated with originating and servicing loans.

Freddie Mac also reported 15-year fixed rates plunged 18 basis points to 3.97%. 5/1 hybrid ARMs dropped 16 basis points to 3.57%, while one-year ARMs averaged 3.17% compared with 3.21% the previous week.

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