With the growing usage of mobile video applications and Internet based video services; techniques and algorithms of the current video compression standards face new challenging demands for lower bit-rate and faster processing speed. H.264/AVC video compression standard is widely used and provides state of the art video compression solution, but still needs to address the challenges of high bit-rate and required processing power. In this paper, a low bit-rate compression algorithm is proposed, which introduces a novel approach that use both DCT (Discrete Cosine Transform) and DWT (Discrete Wavelet Transform) for enhancing the Intra-Prediction phase of H.264/AVC standard. The proposed Hybrid Wavelet-DCT (HW-DCT) algorithm modifies the FSF (Full Search Free) algorithm; by adding wavelet-based transformation prior to the Intra-prediction process. TheHW-DCT algorithm adds up the advantages of wavelet based compression technique to the speed of the FSF algorithm and creates an Intra-prediction algorithm that guarantees 51% lower bit-rate while maintaining similar visual quality and Peak Signal to Noise Ratio (PSNR) of the original H.264/AVC Intra-prediction algorithm. The JM 18.2 Reference software implementation results have validated the effectiveness of our proposed algorithm and shown a significant improvements in both run-time and bit-rate.