Mortgage rates pulled back only marginally this week, leaving borrowing costs close to their highest level in more than a year. Bankrate’s latest national survey of lenders puts the average 30-year fixed mortgage rate at 6.68%, down from 6.69% the previous week. Rates for 15-year mortgages and jumbo loans also moved slightly lower.

Recent economic reports offer some reasons for optimism that mortgage rates could eventually stabilize. The July employment report, released Aug. 7 by the Bureau of Labor Statistics, showed a notable slowdown in labor-market activity. Inflation also continued to ease, with the Consumer Price Index showing annual price growth of 3.4% in July, down from 4.2% in May.

That improvement is encouraging, but inflation remains well above the Federal Reserve’s 2% target, meaning there is still limited room for policymakers to quickly loosen monetary policy.

Financial markets are also facing several forces that could push borrowing costs in the other direction. U.S. Treasury yields have been trending higher, and mortgage rates typically follow those longer-term bond yields. Sean Salter, a professor at Middle Tennessee State University, expects that relationship to keep mortgage rates under upward pressure.

Geopolitical uncertainty adds another layer of risk. Ongoing conflict in the Middle East has contributed to volatility in oil prices, which can feed into broader inflation expectations. If energy costs rise again, investors could become more concerned about persistent inflation and demand higher yields on Treasury securities.

As a result, the outlook remains difficult to predict. Mortgage rates could remain relatively stable in the short term, but Salter believes a modest increase is more likely than a significant decline given the current combination of Treasury yields, inflation concerns, geopolitical tensions, and energy-market uncertainty.

For homebuyers, the latest 6.68% reading represents only a small improvement from last week and does little to change the broader affordability picture. Until financial markets gain greater confidence that inflation is moving sustainably toward the Fed’s target, mortgage rates are likely to remain elevated.