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The average rate on a 30-year mortgage fell this week to its lowest level in more than a year, a welcome affordability boost for prospective\u00a0home shoppers<\/a>\u00a0and homeowners looking to refinance their home loan to a lower rate.<\/p>\n The rate fell to 6.47% from 6.73% last week, mortgage buyer Freddie Mac<\/a> said Thursday. A year ago, the rate averaged 6.96%.<\/p>\n This is the second straight weekly drop in the average rate. It\u2019s now the lowest it\u2019s been since mid-May last year, when it was 6.39%.<\/p>\n Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, pulling the average rate down to 5.63% from 5.99% last week. A year ago, it averaged 6.34%, Freddie Mac said.<\/p>\n \u201cThe decline in mortgage rates does increase prospective homebuyers\u2019 purchasing power and should begin to pique their interest in making a move,\u201d said Sam Khater, Freddie Mac\u2019s chief economist. \u201cAdditionally, this drop in rates is already providing some existing homeowners the opportunity to refinance.\u201d<\/p>\n After jumping to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has mostly hovered around 7% this year \u2014 more than double what it was just three years ago.<\/p>\n The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, extending the nation\u2019s housing slump into its third year.<\/p>\n Sales of previously occupied U.S. homes\u00a0fell in June for the fourth month in a row.<\/a>\u00a0And sales of new single-family homes fell last month to the slowest annual pace since November.<\/p>\n Rates have mostly eased in recent weeks as\u00a0signs of waning inflation<\/a>\u00a0and\u00a0a cooling job market<\/a>\u00a0have raised expectations that\u00a0the Federal Reserve will cut its benchmark interest rate next month<\/a>\u00a0for the first time in four years.<\/p>\n Mortgage rates are influenced by several factors, including how the bond market reacts to the central bank\u2019s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.<\/p>\n This week\u2019s drop in mortgage rates follows a pullback in the 10-year Treasury yield, which briefly slid last week to around 3.7% after worse-than-expected labor market data rattled investors, pushing up demand for bonds.<\/p>\n The yield, which topped 4.7% in late April, was at 4% in afternoon trading in the bond market on Thursday.<\/p>\n If bond yields continue to decline in anticipation of the Fed lowering rates this fall, that could lead mortgage rates to ease further, though most economists expect the average rate on a 30-year home loan to remain above 6% this year.<\/p>\n Even so, the recent pullback in mortgage rates has already spurred a surge in homeowners seeking to refinance. Applications for mortgage refinance loans jumped\u00a0last week to their highest level in two years.<\/a><\/p>\n Rates may have to come down more before many would-be homebuyers facing record-high housing prices and a chronic shortage of properties on the market can afford to buy a home.<\/p>\n \u201cBuyers are biding their time, waiting for rates to fall further and for more inventory to come onto the market,\u201d said Lisa Sturtevant, chief economist at Bright MLS.<\/p>\n<\/div>\n\nRecommended Newsletter:\u00a0<\/strong>The Fortune Next to Lead newsletter is a must-read for the next generation of C-suite leaders. Every Monday, the newsletter provides the strategies, resources, and expert insight needed to claim the most coveted positions in business. Subscribe now<\/a>.<\/div>\n