M
ortgage borrowing costs have hit their lowest point in over a month, with the average rate for a 30-year fixed-rate mortgage dipping to 6.69% this week. This marks a decline from last week's 6.81%, according to Freddie Mac.

    The decrease has led to an uptick in mortgage application activity, which serves as a gauge of homebuying activity. "Prospective home buyers are responding to even small changes in rates," says Sam Khater, chief economist at Freddie Mac. Mortgage applications for home purchases jumped 6% last week, the highest level since January.

    The drop in mortgage rates may be helping prospective buyers increase their purchasing power. At this week's average rate, a monthly mortgage payment on a $400,000 home would be around $2,063 with a 20% down payment, or $2,321 with a 10% down payment.

    The decrease in rates coincides with an uptick in housing inventory nationally, which may provide potential buyers with "the chance to finally move off the sidelines," says Jessica Lautz, deputy chief economist at the National Association of REALTORS. Nationwide, housing inventory is up nearly 20% compared to a year ago.

    However, there is still a long way to go before there is enough housing inventory to meet pent-up demand in the market. "While existing homes are growing, the inventory is still below February 2020 levels," Lautz notes.

    Freddie Mac reports the following mortgage rate averages for the week ending December 5:

    * 30-year fixed-rate mortgages: averaged 6.69%, down from last week's 6.81% average and a year ago's 7.03%.

    * 15-year fixed-rate mortgages: averaged 5.96%, falling from last week's 6.1% average and last year's 6.29%.