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(Bloomberg) -- Mortgage rates in the US resumed their downward path, dropping to a new low for the year.

The average for a 30-year, fixed loan was 6.46%, down from 6.49% last week, Freddie Mac said in a statement Thursday.

Borrowing costs are down significantly after topping 7% earlier this year, giving house hunters more purchasing power and coaxing some would-be buyers off the fence. Sales of previously owned US homes increased in July for the first time in five months, the National Association of Realtors reported Thursday.

But even with the 1.3% gain from the month before, the sales pace was the weakest for any July since 2010, showing that high prices and a shortage of affordable listings are still keeping deals out of reach for many Americans. Buyers and sellers also may be holding off on decisions until financing costs fall further.

“Earlier this month, rates plunged and are now lingering just under 6.5%, which has not been enough to motivate potential homebuyers,” Sam Khater, Freddie Mac’s chief economist, said in the statement. “We expect rates likely will need to decline another percentage point to generate buyer demand.”

Many housing experts are looking forward to interest-rate reductions by the Federal Reserve to juice up the sluggish market. While cooling inflation has bolstered the case for a first rate cut next month, the timing and extent of future moves also will depend on the health of the labor market, according to Realtor.com economist Jiayi Xu.

“Policymakers are aiming to time the cuts carefully,” she said, “without triggering a sharp increase in unemployment.”

The recent slide in mortgage rates has made housing bills a bit lighter. The median monthly payment was $2,587 during the four weeks ended Aug. 18, down 0.1% from a year earlier, Redfin Corp. reported. While that’s just a tiny drop, it marks the first annual decline since 2020, the brokerage said.