At 5.87 percent, the average 30-year fixed interest rate dropped over last week's average of 6.13 percent with mortgages including an average of 0.5 points. The 30-year fixed-rate mortgage averaged 6.16 percent a year ago, the report said.

Fifteen-year fixed rate mortgages also decreased, averaging 5.27 percent with an average of 0.5 points. A week ago 15-year fixed rate mortgages averaged 5.6 percent, while a year ago they averaged 5.9 percent, the weekly report said.

"Mortgage rates fell this week as various actions were taken to improve market liquidity," said Freddie Mac chief economist Frank Northaft. "Meanwhile, retail sales fell by 0.6 percent in February, contrary to the consensus forecast of a 0.2 percent increase, signaling that the condition of the economy might be weaker than previously thought," he said.