The U.S. Federal Reserve just gave stretched-thin homebuyers a rare break.

The Fed held interest rates steady on Wednesday, declining to jack them up higher this month in its fight to tame inflation. That’s expected to nudge mortgage interest rates down a little by year’s end, potentially saving buyers some money. (While mortgage rates are separate from the Fed’s rates, they often move in the same direction.)

“Mortgage rates have likely peaked,” says Realtor.com® Chief Economist Danielle Hale. “But we’re not going to see a sudden or sharp decline. It’s going to be gradual.”

By year’s end, mortgage rates nationally could drop to the low 6% range as long as inflation continues to slow, predicts Hale. She expects they will eventually head back down to around 5% over the next few years.

Mortgage rates averaged 6.71% for 30-year fixed-rate loans in the week ending June 8, according to Freddie Mac. They averaged 6.95% as of Wednesday, according to Mortgage News Daily. They had fallen below 3% in 2020 and 2021.

“Activity in the housing sector remains weak, largely reflecting higher mortgage rates,” Fed Chair Jerome Powell said during a Wednesday press conference. “Certainly, housing is very interest rate-sensitive, and it’s the first place, really, or one of the first places, that’s either helped by lower rates or is held back by higher rates. And we certainly saw that over the course of the last year. We now see housing putting in a bottom and maybe moving up a little bit. We’re watching that situation carefully.”

Slowing inflation likely helped the Fed decide against jacking interest rates up any further this month. In May, inflation rose 4% year over year. While inflation is roughly double the Fed’s 2% target, inflation isn’t rising as much as April’s 4.9% year-over-year jump, according to the government’s consumer price index. And it’s far below the 9.1% surge of last June.

Plus, the cost of housing, which makes up about a third of the goods and services that are used to measure inflation, is expected to come down this year. That will mostly be a result of falling rental prices, although moderating homeownership costs could also help bring inflation down as well.

The Fed also doesn’t want to put any additional pressure on the banking industry, after several banks recently failed.

“We’ve still got a ways to go, but we’ve made some substantial progress in inflation,” says Hale.

However, the Fed indicated it will likely raise rates next month if inflation doesn’t fall further and the economy continues on its hot streak. Another hike could also happen later this year.

That would likely boost mortgage rates higher than Hale originally anticipated.

“We’ll still be under 6.5%,” she says. “We just won’t get as close to 6%.”

Falling home prices could also help cash-strapped homebuyers. Nationally, the median home list price dipped for the first time year over year since Realtor.com began collecting weekly data in mid-2017. Prices slipped 0.9% for the week ending June 10, according to the most recent data.

Sellers have been forced to adjust their prices to a reality where buyers’ budgets can’t stretch quite as high anymore. Sale prices have been dropping for existing homes, which excludes new construction, since February, according to the National Association of Realtors®. Now, asking prices are catching up.

“There will be some relief,” says Hale. “The number of homes for sale is still pretty limited, so we don’t expect to see big price declines.”

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