At 5.85, the average 30-year fixed interest rate dropped slightly from last week's average of 5.87 percent with mortgages including an average of 0.4 points, down from last week's 0.5 points. The 30-year fixed-rate mortgage averaged 6.16 percent a year ago, the report said.

Fifteen-year fixed rate mortgages gained during the week ending March 27, averaging 5.34 percent with an average of 0.4 points. A week ago 15-year fixed rate mortgages averaged 5.27 percent, while a year ago they averaged 5.86 percent, the weekly report said.

"On the housing front, house prices keep declining across the nation," said Freddie Mac chief economist Frank Northaft.

"The National Association of Realtors reported that its home affordability index was at the highest level in nearly five years," Northaft said. "Meanwhile, retail sales fell by 0.6 percent in February ... signaling that the condition of the economy might be weaker than previously thought."