Mortgage rates dropped slightly last week

A couple of weeks ago, rates had popped up to 4.08 percent on 30-year fixed-rate mortgages for the first time since December. 

Last year at this time, the 30-year year averaged 4.87 percent. 

In February, the rate dropped down to 3.87 percent, the lowest since records were kept in the 1950s.

Meanwhile, the average rate on the 15-year fixed mortgage fell to 3.21 percent from 3.23 percent, still higher than the record low 3.13 percent reached last month. 

Lower rates have made purchasing and refinancing much more affordable, but the market has faced other hurdles such as tight credit, higher downpayment requirements and persistently high unemployment. 

But the labor market has been showing steady signs of recovery, posting some of the best results in more than a decade, fueling consumer spending even despite slow income growth. Existing home sales had one of their best winters in five years, the economy grew at a 3 percent pace and home builders say they expect gradual improvement this year before the pace picks up in 2013. 

Freddie expects 30-year fixed-rate mortgages to gradually increase throughout the year to about 4.5 percent, according to a report released last week. 

Another positive sign is an increase in mortgage applications, which were up 4.8 percent from a week earlier, as homeowers refinanced their loans and purchases picked up after a sluggish start to the year, the the Mortgage Bankers Association reported Wednesday. 

Refinancing picked up 4 percent, the first increase after six straight weeks of declines, and purchases were up 7.2 percent to the highest level since Dec. 2, for the week that ended March 30.