The average rate on a 30-year mortgage last week fell to its lowest level in nearly a year, reflecting a pullback in Treasury yields ahead of an expected interest rate cut from the Federal Reserve this week.

The long-term rate last week eased to 6.35 percent from 6.5 percent the previous week, according to mortgage buyer Freddie Mac. A year ago, the rate averaged 6.2 percent.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate slipped to 5.5 percent from 5.6 percent last week. A year ago, it was 5.27 percent, Freddie Mac said.

Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation.

The housing market has been in a slump since 2022, when mortgage rates began climbing from historic lows.

Home sales have remained sluggish so far this year as the average rate on a 30-year mortgage has mostly hovered above 6.5 percent.

The average rate is now at its lowest level since Oct. 10, when it was 6.32 percent.

A similar pullback in rates happened last year in the weeks leading up to the Fed’s interest rate policy meeting in September. That’s when the Fed cut its key interest rate for the first time since March 2020, in the early days of the pandemic.

Back then, the average rate on a 30-year mortgage got down to a two-year low of 6.08 percent, but soon after climbed again, reaching above 7 percent by mid-January.

Mortgage rates could follow a similar trajectory this time, given that expectations of a Fed rate cut have already brought mortgage rates lower.

“We should not expect rates to drop much further and, in fact, there is a possibility that mortgage rates could actually increase after the Fed cut,” said Lisa Sturtevant, chief economist at Bright MLS.

For now, the recent pullback in mortgage rates has been encouraging to many prospective homebuyers and homeowners eager to refinance.

Mortgage applications, which include loans to buy a home or refinance an existing mortgage, jumped to a three-year high two weeks ago, according to the Mortgage Bankers Association.

Applications for mortgage refinancing loans made up nearly 50 percent of all applications two weeks ago, as homeowners who bought in recent years when mortgage rates surged seized the opportunity to lower their monthly home loan payment.

If mortgage rates continue to ease, home shoppers will benefit from more affordable financing, but lower mortgage rates could also bring in more buyers, making the market more competitive at a time when sellers across the country are having a tougher time driving a hard bargain.

Rates have been mostly declining since late July amid growing expectations that the Fed will cut its benchmark short-term interest rate for the first time this year at the central bank’s meeting of policymakers this week.

While the Fed doesn’t set mortgage rates, its actions can influence bond investors’ appetite for long-term federal government bonds, such as 10-year Treasury notes.

Lenders use the yield on 10-year Treasurys as a guide to pricing home loans. The yield was at 4 percent late last week.

The Fed has kept its main interest rate on hold this year because it’s been more concerned about inflation potentially worsening because of President Donald Trump’s tariffs than about the job market.

In a speech last month, however, Federal Reserve Chair Jerome Powell signaled the central bank may cut rates in coming months amid concerns about weaker job gains following a July jobs report, which included downward revisions for June and May.

More recent job market data have fueled speculation that the central bank could be preparing to lower rates.

The Labor Department earlier this month said the economy added 22,000 jobs in August. Last week, revised jobs data from the government showed the country’s job market had been much weaker last year and this year than earlier data suggested.

The latest weekly snapshot of unemployment benefit claims, meanwhile, shows more workers applied for unemployment benefits two weeks ago, an indication that the number of layoffs could be rising.