Mortgage rates moved off their record lows this week, but remain at historically attractive levels.

According to Freddie Mac's latest survey, the 30-year fixed mortgage rate averaged 4.87% compared with 4.78% the previous week, and 5.88% a year ago.

Meanwhile, 15-year fixed rates increased just two basis points to 4.54%; five-year hybrid ARM rates were up just one basis point to 4.93%, while one-year ARM rates rose to 4.83% from 4.75%.

Despite the increase, application activity is expected to remain responsive to the favorable levels. For the week ending April 3, the Mortgage Bankers Association (MBA) reported its Refinance Index rose 3% to 6814.

Bank of America/Merrill Lynch economists have said they expect mortgage rates will fall to 4.20% by year-end due to the weak economy and the government"s efforts.

Meanwhile, Credit Suisse analysts are less aggressive in their outlook and they believe that the 30-year fixed mortgage rate will remain in the 4.5% to 5.0% area for the year, though with a bias toward the lower half of this range.

Early expectations regarding April prepayments, which will be reported in May, suggest a 20% increase in FNMA speeds at this time.

Speeds on 2008-2006 5.5s and 6s are currently projected to prepay in the mid-30 CPR area, while 6.5s and 7s are seen in the high 20s.

Speeds are expected to increase nearly 50% in May with 5.5s and 6s at around 50 CPR with higher coupons at around 40 CPR.

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