Freddie Mac reported in its weekly survey that the 30-year fixed mortgage rate averaged 4.85%, down 13 basis points from last week.

For the month of March, 30-year rates averaged 5.00% down 13 basis points from February's average. Meanwhile, through the first three weeks of March, the Refinance Index is up 38% from the previous month's average.

With lower mortgage rates and increasing refinancing activity, higher prepayments are projected to start being felt as early as the April report (released in May) and more fully in the May report.

For example, speeds at this time on FNMAs are predicted to increase 17% on aggregate in April, while May is seen surging over 50% as the impact of the housing plan begins to be felt.

The largest percentage increases are projected in 6s and higher. Some firms are projecting speeds in the 60 CPR area by summer for higher coupon conventionals.

But in a brief note from FTN Financial's analyst Walter Schmidt, he pointed out "a refi application does not a prepayment make."

A regression analysis using the latest factor tape versus the Refinance Index predicted a one-month CPR for the 30-year fixed rate universe of 38.

The February speed, however, was just 23. While speeds will definitely move higher on the government's effort, FTN believes the characterization of refinance wave might be rather aggressive and "perhaps "refi crest" is more appropriate."

Mortgage rate declines in the other major loan types included in Freddie"s report were more modest at just three basis points for 15-year fixed mortgage rates to 4.58%; two basis points to 4.96% for five-year Hybrid ARMs; and six basis points to 4.85% for one-year ARM rates.

Between the decline in mortgage rates and the government"s efforts to help borrowers refinance, application activity is expected to have climbed higher this week.

For the week ending March 20, the Mortgage Bankers Association's Refinance Index jumped nearly 42% to 6363.

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