Several significant factors are blending together right now in housing to create an ideal buying and refinancing market for first-time buyers and existing homeowners.

“Conditions are very favorable for first-time homebuyers to start getting back into the market,” said Fitch Ratings Director Sean Nelson. “Mortgage rates are falling, Federal Housing Authority insurance premiums are coming down, home prices are cooling and employment is steady.”

Mortgage applications posted another steep increase Wednesday morning after a drastic 49% surge for the week ended Jan. 9, the latest Mortgage Bankers Association’s Weekly Mortgage Applications Survey said.

“Mortgage application volume increased last week to its highest level since June 2013, led by a 22% increase in refinance application volume. This increase was largely due to mortgage rates dropping to their lowest level since May 2013,” said Mike Fratantoni, MBA’s Chief Economist.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.80%, the lowest level since May 2013, from 3.89%, with points increasing to 0.29 from 0.23 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

However, rates are not significantly lower than 2012-2013, so the recent declines may not have as large of an impact on refinance rates as in the past.

What could be different from two to three years ago is a borrower’s situation. Those who were unable to refinance in the past because they were underwater on their mortgage may have built up enough home equity to refinance after several years of strong home price growth, the Fitch report explained.

“In addition, those who took out a mortgage in the last year and a half when rates were higher could benefit from refinancing with today’s rates,” the report said.

And this low-rate environment is not expected to change too soon, with Freddie Mac’s latest report saying mortgage rates are expected to remain around 4% for the first two quarters of the year as long as uncertainty in foreign markets continues to result in a flight to safety into U.S. Treasury long-term bonds.

“Until rates start to rise later in the year, housing markets should respond positively and we anticipate increases in home sales and continued improvement in construction activity. With rates lower at the beginning of the year, we’ll see higher than expected refinance volumes as well,” said Frank Nothaft, Freddie Mac vice president and chief economist.

Couple this with both government-sponsored enterprises officially announcing their individual 97% loan-to-value products, and the housing market is ready to enter the spring homebuying season.

Lenders like Ditech Mortgage and AmeriSave Mortgage already announced that they would offering 3% down payments shortly after the government released the new products.

On Tuesday,Housing & Urban Development Secretary Julián Castro told first-time homebuyers in a fireside chat moderated by Zillow (Z) Chief Economist Stan Humphries that now it’s the time to step into housing.

“Investment in a home is an investment in the long run in creation of wealth,” Castro said. “A confluence of better economy, wages starting to go up and gas prices going down create some breathing room for people stuck in that rut to save some money to buy that first home.”

Source: Brena Swanson, “Why right now is the perfect recipe for more mortgage lending,