Mortgage rates fell again this week amid relentless inflation and persistent doubt around the health of the U.S. economy.

The rate drop — the third in as many weeks — was slight but still meaningful given rising home prices and generally higher borrowing costs.

America’s most popular home loan — the 30-year fixed mortgage — is still significantly more expensive than it was last year.

That’s eating away at consumers’ buying power and beginning to stifle demand.

“Heading into the summer, the potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing,” Sam Khater, Freddie Mac’s chief economist, said Thursday in the housing giant’s weekly rate update.

“This is welcome news following unprecedented market tightness over the last couple years.”

30-year fixed-rate mortgages

The average rate on a 30-year fixed mortgage is averaging 5.09%, down just a touch from 5.1% last week, Freddie Mac reports.

A year ago at this time, the 30-year rate was averaging 2.99%.

With the 30-year rate now more than 2 percentage points higher than last year, home shoppers are facing a stark new reality.

“Homebuyers need to earn about $30,000 more if they want to buy the typical home now compared to a year ago,” says Nadia Evangelou, senior economist for the National Association of Realtors.

15-year fixed-rate mortgages

The 15-year fixed rate mortgage was up slightly this week to 4.32%, compared with 4.31% a week ago, Freddie Mac says. Last year at this time, the 15-year rate averaged 2.27%.

Rates, in general, have been rising as the Federal Reserve scrambles to beat back inflation. Its efforts have raised borrowing costs for a bevy of consumer loans.

Applications to take out new home loans and refinance existing ones have been on the decline. Applications fell 2.3% last week, according to the Mortgage Bankers Association.

“Mortgage applications decreased to the lowest level since December 2018, as the purchase market continues to struggle with supply and affordability challenges,” the association’s Joel Kan says.