Mortgage rates dropped from last week in a positive development for the US housing market.

The average rate on the 30-year, fixed-rate mortgage fell to 6.77% from 6.89% a week prior, marking its lowest level since mid-March, Freddie Mac reported on Thursday. A year ago, the average rate on a 30-year, fixed-rate loan was 6.78%, according to Freddie Mac.

Separately, the average rate for the 15-year fixed mortgage was 6.05%, down from 6.17% a week prior and 6.06% a year ago.

“Mortgage rates are headed in the right direction, and the economy remains resilient, two positive incremental signs for the housing market,” Sam Khater, Freddie Mac’s chief economist, said in a press release.

Read more: Mortgage rates today, July 18, 2024: 15-year rates still under 6%

Despite lower rates, homebuyers seem unimpressed. Applications for a mortgage to purchase a house fell 3% for the week on a seasonally adjusted basis.

Appetite for the new home market has been under pressure. Mortgage applications to purchase new homes fell 16% from May to June, according to the Mortgage Bankers Association.

“Homebuyers have yet to respond to lower rates, as purchase application demand is still roughly 5 percent below spring when rates were approximately the same. This is not uncommon: sometimes as rates decline, demand weakens, and the apparent paradox is driven by buyers making sure rates don’t decline further before they decide to purchase,” Khater said.

Meanwhile, refinancing saw a significant increase last week, with many homeowners seizing the opportunity of lower mortgage rates to reduce the interest rate on their current home loans.

Applications to refinance a home loan jumped 15% last week from the previous week, the highest level since August 2022, the Mortgage Bankers Association reported.

Read more: Mortgage refinance: How to get started

Over the last few years, high interest rates have hindered the housing market. Prospective buyers have been sidelined by the burden of high monthly payments. Sellers have also been reluctant to sell their homes, holding on to their ultra-low mortgage rates from the pandemic.

Read more: Is this a good time to buy a house?

The downward trend in mortgage rates is likely to continue as a Federal Reserve rate cut could be in sight. Market observers are assuming that the first rate cut of this year will be in September as the economy has shown signs of cooling.

“We should expect to see both more buyers and more sellers enter the market, and we could see a market that is closer to balanced than it has been in years,” Bright MLS chief economist Lisa Sturtevant told Yahoo Finance in an email.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.

Click here for real estate and housing market news, reports, and analysis to inform your investing decisions