LOS ANGELES (AP) — A recent pullback in mortgage rates is spurring more homeowners to refinance their home loan and lower their monthly payments.

The Mortgage Bankers Association’s refinance index, which tracks home loan application volume, surged 16% last week from the previous week to its highest level in two years, the association said Wednesday.

Refinance applications were up nearly 60% versus the same week last year.

Home loan applications rose overall last week to their highest level since January, though much of that was due to the surge in refinance applications.

Despite the lower borrowing costs, applications for loans to buy a home rose only 0.8% from the previous week and were down about 11% from a year earlier, the MBA said.

For many home shoppers, mortgage rates remain too high, given record-high housing prices and a chronic shortage of properties on the market.

“For-sale inventory is beginning to increase gradually in some parts of the country and homebuyers might be biding their time to enter the market given the prospect of lower rates,” said Joel Kan, the MBA’s deputy chief economist.

RELATED COVERAGE Average rate on a 30-year mortgage falls to 6.47%, lowest level in more than a year Average rate on a 30-year mortgage falls to 6.73%, lowest level since early February Average rate on a 30-year mortgage inches up to 6.78%, first uptick in three weeks

The average rate on a 30-year mortgage was 6.73% last week, its lowest level since early February, according to mortgage buyer Freddie Mac. The average rate declined again this week, falling to 6.47%, the lowest level in more than a year.

After jumping to a 23-year high of 7.79% in October, the average rate has mostly hovered around 7% this year — more than double what it was just three years ago.

The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, extending the nation’s housing slump into its third year.

Rates have mostly eased in recent weeks as signs of easing inflation and a cooling job market have raised expectations that the Federal Reserve will cut its benchmark interest rate next month. Mortgage rates are influenced by several factors, including how the bond market reacts to the Fed’s rate moves.

“If the recent drop in longer-term rates is sustained, then we expect to see another uptick in refinance applications and subsequent refinance mortgage volumes this week,” said Doug Duncan, chief economist at Fannie Mae. The mortgage buyer’s own index of refinance activity shows that refinance applications climbed 20% last week from the previous week.

Rates will have to fall further before more homeowners are incentivized to refinance, given that some 86% of all outstanding home mortgages have an interest rate below 6%, and more than three quarters have a rate 5% or lower, according to Realtor.com.

Still, expectations that rates will continue to ease and prompt more homeowners to refinance have helped lift shares in mortgage companies so far in the third quarter.

Rocket Cos. is up 28.5%, United Wholesale Mortgage gained 19.5% and LoanDepot is up 47.9%.