US mortgage rates have fallen to their lowest level since last May - offering much-needed respite to overstretched homebuyers.

New figures from Government-backed lender Freddie Mac show the average rate on a 30-year fixed-rate home loan is now 6.6 percent, down from 6.66 percent last week.

Yet despite the good news, buyers still face shelling out an extra $700 a month than if they had bought two years ago.

Freddie Mac chief economist Sam Khater said Thursday: 'This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability.

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Mortgage rates have been pushed up by the 's to tame . The Fed's funds rate is now at a 22-year high of between 5.25 and 5.5 percent.  

US mortgage rates have fallen to their lowest level since last May - offering much-needed respite to overstretched homebuyers

Despite the good news, buyers still face shelling out an extra $700 a month than if they had bought two years ago

At today's rate, somebody purchasing a $400,000 home with a 5 percent downpayment faces shelling out $2,427 per month on a 30-year deal.

But had they bought in January 2022 - when rates were hovering at around 3.45 percent - the same buyer would have paid just $1,696.

It comes amidst ongoing uncertainty over when the

In theory higher rates are used to reign in consumer spending when inflation is red-hot. Cooling inflation is therefore critical to bringing rates down.

But the annual rate of inflation rose slightly to 3.4 percent in December, sparking fears the Fed could delay rate cuts until later this year. Retail sales

Officials will next meet on January 31 but it was widely expected they would vote to hold rates steady on this date.

Instead economists had pinned all their hopes on the following March 20 meeting. At the very beginning of the year, traders had priced in a 70 percent-plus probability that the central bank will announce cut rates by 25-basis points on this date. 

Inflation must cool in order to pave the way for interest rate cuts this year - after the Fed hiked rates to a 22-year high of between 5.25 and 5.5 percent. Economists had predicted a rate cut was likely in March this year 

Inflation rose to 3.4 percent in December - above economists' predictions 

However, experts agreed the rise in both inflation and retail spending in December puts this plan in jeopardy.

Andrew Hunter, deputy chief US economist at Capital Economics, told clients after the release: 'We still think a further slowdown lies ahead as slowing employment and wage growth feed through and the lagged impact of higher interest rates takes some additional toll, but there is still little to suggest a sharper downturn lies in store.' 

Mortgage rates are not directly dictated by the Fed's actions but instead track the pattern of 10-year Treasury Yields.

These are determined by a range of factors including inflation, economic growth and the Fed's benchmark funds rate.