The 15-year rate took an even larger drop of 27 basis points to 6.29% from 6.56% in the prior PMMS. In the same week of 2022, the 15-year average came in at 5.67%. 

Rates are declining as the U.S. economy shows signs of approaching the Goldilocks scenario  policymakers had been targeting, driving down Treasury yields. Since closing at $4.33 at close of trading on Nov. 30, the 10-year yield, which typically correlates to the direction of mortgage rates, has dropped to a low of $4.10 at the end of Wednesday. By midday Thursday, it had risen back to $4.13.

"On one hand, labor market data showed hiring remains stable and layoffs remain low. On the other hand, job openings fell to their lowest level since March 2021 — indicating that a slowdown in economic activity could be underway," said Orphe Divounguy, senior macroeconomist at Zillow Home Loans, in a research statement.

Growth in the core personal consumption expenditures index, which the Federal Reserve uses to gauge inflation — also slowed," Divounguy added.

With expectations of inflation to slow further, achieving some of the central bank's goals when it began raising rates in early 2022, many economists now suggest the Fed bank is done with its hikes, according to a recent Reuters survey. Questions linger, though, about how soon it might start slashing interest rates.

While rates appear to be heading in a favorable direction for consumers, the trend will need to sustain itself for longer to reach a satisfactory level for mortgage lenders, said Freddie Mac Chief Economist Sam Khater.

"When rates began to rapidly drop, purchase applications rebounded initially, but this

improvement in demand diminished in the last week," he said in a press release. "Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand."

In its latest data, the Mortgage Bankers Association reported purchase application levels coming in flat week over week. But the highest level of activity for refinances in months offset the lack of growth in purchases.

Other rate trackers similarly saw sizable drops in the 30-year mortgage on Thursday, with Zillow's tool reporting a fall to 6.62%, down from last week's average of 6.76%, but up from Wednesday.

The average of the 30-year conforming rate sat at 6.96% Thursday afternoon, according to Optimal Blue's index, dipping back below the 7% threshold after coming in at at 7.11% a week earlier.