The 30-year fixed-rate mortgage averaged 6.35% this week, and some economists believe rates will continue to fall further over the upcoming weeks. Late last week, Federal Reserve Chair Jerome Powell said the “time has come for policy to adjust” and said an interest rate is likely at the Fed’s next, mid-September meeting.

“Mortgage rates fell again this week due to expectations of a Fed rate cut,” says Sam Khater, Freddie Mac’s chief economist. “Rates are expected to continue their decline and while potential home buyers are watching closely, a rebound in purchase activity remains elusive until we see further declines.”

Mortgage rates are significantly lower than what they were a year ago—when they averaged 7.18%. That could translate into hundreds of dollars in savings on borrowing costs compared to a year ago. At the 6.35% average rate this week, a monthly mortgage payment on a home priced at about $400,000 would be $1,991 (also assuming a 20% down payment), says Jessica Lautz, deputy chief economist of the National Association of REALTORS®.

“This is the lowest that mortgage interest rates have dropped in the past 15 months,” Lautz says. “This changes housing affordability for home buyers. For buyers who sought a mortgage at the recent high of 7.79% in October 2023, the payment would be $2,301. At 6.35%, this is a payment difference of $310 monthly or $3,720 a year.”

Still, some home buyers are shrugging off the latest drops and holding out for even lower rates. After all, despite the recent dip in rates over recent weeks, mortgage applications for home purchases only eked out a 1% gain and remain 9% lower than a year ago, the Mortgage Bankers Association reports.

“Prospective home buyers are staying patient now that rates are moving lower and for-sale inventory has started to increase,” says Joel Kan, MBA’s deputy chief economist.

Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine