Mortgage rates are CAI Communitycreeping lower after soaring this fall to their highest level in more than two decades.

The interest rate on a typical fixed 30-year loan is now 6.8%, its lowest level since June, the Mortgage Bankers Association said Wednesday. That's down from 7.1% a week earlier and from 8% in October, the highest in 23 years. 

The dip comes amid easing inflation and as the Federal Reserve holds its benchmark rate steady while forecasting possible cuts in the new year. Mortgage rates don't necessarily follow the Fed's rate increases, but tend to track the yield on the 10-year U.S. Treasury note. Investors' expectations for future inflation, global demand for Treasurys and Fed policy all influence rates on home loans.

The Fed projects that inflation will sink to 2.4% next year, in the vicinity of its 2% target.

Still, reduced borrowing costs are not exactly spurring a flood of activity by potential homebuyers. Home prices remain unaffordable for most Americans, while owners who took out a mortgage at far lower rates are reluctant to sell.

"The supply of homes for sale remains scarce. Lower mortgage rates may bring some sellers off the sidelines, though most homeowners with mortgages still have rates well below current market rates," Nancy Vanden Houten, lead U.S. economist at Oxford Economics, said in a report. 

The National Association of Realtors said Wednesday that existing home sales rose 0.8% in November to an adjusted annual rate of 3.8 million, halting a five-month slide. Sales were off 7.3% from a year ago.

"The latest weakness in existing home sales still reflects the buyer bidding process in most of October when mortgage rates were at a two-decade high before the actual closings in November," Lawrence Yun, the NAR's chief economist, said in a statement. "A marked turn can be expected as mortgage rates have plunged in recent weeks."

Thomas Ryan, a property economist at Capital Economics, also projected a continuation of the positive trends currently in view for the struggling housing market.

"Looking ahead to December, we anticipate the recent fall in borrowing costs and pickup in mortgage activity will translate into a further recovery in sales volumes. In 2024 we anticipate further falls in mortgage rates which will bring more buyers and sellers into the market," he wrote in a report.

In:
• Mortgage Rates

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York.