After staying well above 8 percent for most of May, mortgage rates finally retreated back below that psychologically important level. Rates have been helped by evidence of a slowing economy and little domestic inflation that have convinced many economists that there may be no need for further rate hikes by the Fed.

According to Bank Rate Monitor's daily survey of lenders, the average 30-year fixed rate mortgage fell to 7.98% on Wednesday. The 15-year fixed and 30-year jumbo rates dropped to 7.70% and 8.29% respectively. The one-year adjustable rate climbed to 7.23%.

Treasury bond prices strengthened Wednesday on the expectation that the Fed won't raise rates this month, with the yield on the 10-year Treasury note falling to 6.05% while the 30-year bond yield slipped to 5.90%.

Stocks were mixed as prospects for stable interest rates were tempered by earnings concerns. The Dow Jones Industrial Average gained 66.11 points to 10,687.95, while the Nasdaq composite lost 53.65 points to 3,797.41.

For more interest rate news, check out the Realty Times Interest Rate Watch