Applications to refinance home loans increased 19% last week from the previous week—or 27% year over year—after mortgage rates dropped from a high of 8% in mid-October to less than 7%, the Mortgage Bankers Association (MBA) reported Wednesday. A 30-year fixed mortgage currently averages 6.82%, according to Mortgage News Daily: the lowest it’s been in months.

“Mortgage rates dropped last week, as incoming data point to a slowing economy and support a pivot by the Federal Reserve to begin cutting rates next year,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement.

During the past month, mortgage rates have dropped two-thirds of a percentage point, from 7.49% in mid-November, Mortgage News Daily data shows. That’s largely due to the Federal Reserve’s four-month pause on interest rate hikes and plans for three quarter-point cuts to its benchmark interest rate next year.

“This is good news for the housing and mortgage markets,” Fratantoni said. “We expect that this path for monetary policy should support further declines in mortgage rates.” The organization also on Wednesday forecast “modest growth” in new and existing home sales in 2024, following an “extraordinarily slow” 2023.

Mortgage originations, refinancing are up, but it’s more of a recovery 

Any interest rate cuts by the Fed next year would help both current and prospective homeowners.

“A reduction in interest rates could not only help in stimulating the mortgage origination market, but could also provide an opportunity for millions of consumers who have recently taken on high-interest mortgages to refinance and see significant impacts to their monthly budgets,” Michele Raneri, vice president of U.S. research and consulting at TransUnion, tells Fortune. 

Mortgage applications were up more than 7% week over week, according to MBA, but purchase volumes are still much lower than last year, “as prospective homebuyers are still challenged by a lack of inventory, even as rates have decreased,” Fratantoni said. 

A third-quarter TransUnion report also showed that mortgage originations were down nearly 37% year over year, from 1.9 million in 2022 to 1.2 million in 2023. 

“While this plateauing of interest rates may be enough to motivate some consumers who have been holding off to engage in the mortgage market, many may continue to wait until the Fed ultimately reduces interest rates,” Raneri adds. 

However, the current drop in mortgage rates will likely bring some homeowners back into the market, whether it’s to buy a new property or refinance their current mortgage, Melissa Cohn, regional vice president at William Raveis Mortgage, tells Fortune. Plus, homeowners with adjustable-rate mortgages will start to see a lowering of their rates.

Refinancing now could save homeowners hundreds of dollars per month, Raneri says. Since January 2021, there have been 3 million new mortgages originated at rates of 6% or higher, she says, with monthly payments on these high-interest mortgages averaging $2,201. If rates dropped even to 5.5% through a refinance, it could mean “significant savings” for these homeowners, to the tune of nearly $300 per month. That’s after they pay upfront financing fees, however, which can run into the thousands of dollars.

“Homeowners would be able to use [this money] elsewhere in this continued high cost-of-living environment in which every dollar counts,” she says.