U.S. mortgage rates have plummeted to their lowest levels since May 2023, driven by the Federal Reserve's signals of potential rate cuts and a weaker job market. The 30-year fixed mortgage rate fell to 6.55%, leading to a significant surge in refinancing applications, which jumped 16% from the previous week and were 59% higher than a year ago. The overall mortgage application volume also rose by 6.9%, though purchase activity saw only a slight increase of 1% due to ongoing affordability challenges and low inventory. Despite the drop in rates providing some relief, the majority of homeowners with mortgages below 5% have little incentive to refinance. Experts suggest that while the rate cuts may help improve housing affordability, significant challenges remain, highlighted by a low housing sentiment index and high rental intentions.