NEW YORK >> The average interest rate on the popular 30-year fixed-rate mortgage fell to its lowest level since mid-March this week, a welcome development for a housing market struggling to find its footing and one that may continue if the Federal Reserve cuts rates as expected in the months ahead.

The 30-year fixed-rate mortgage averaged 6.77% during the week ending July 18, the lowest level since mid-March, down from 6.89% in the prior week, mortgage finance agency Freddie Mac said today.

It averaged 6.78% during the same period a year ago. Data shows that homebuyers are not responding to lowering rates yet with purchase application demand remaining roughly 5% below where it was in the spring, Freddie Mac’s chief economist said.

“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,” Chief Economist Sam Khater said in a statement.

The housing market has been one of the sectors most affected by the interest rate increases from the Fed since early 2022. In 2023, the volume of existing-home sales reached the

lowest level since 1995 and the supply of home sales remained tight.

Many homeowners are reluctant to sell because their existing home loans are still locked in at much lower rates, and buying another house likely would mean a higher rate and added cost. Pinched inventory continues to keep house prices inflated.

Economists are hopeful that the anticipated start of rate cuts by the Fed — perhaps as early as September — could flow through to support the housing market through lowered borrowing costs in the months ahead.

Signals about the market’s halting recovery are mixed. Overall housing starts rose 3.0% in June, but that was driven by apartment projects, not single-family home construction, where starts fell to an eight-month low last month, the Census Bureau said on Wednesday.

Data on existing home sales for June is due next week from the National Association of Realtors. Sales of pre-owned homes had fallen for three straight months through May.