Mortgage rates rose again this week, topping 7% for the first time since 2002.

The 30-year fixed-rate mortgage averaged 7.08% in the week ending October 27, up from 6.94% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate stood at 3.14%.

The last time the average rate surpassed 7% was in April 2002.

Mortgage rates have risen almost every week since late August and have more than doubled since the beginning of the year.

The rapid rise has been fueled by the Federal Reserve’s unprecedented campaign of hiking interest rates in order to tame soaring inflation. The combination of the central bank’s rate hikes, investor’s concerns about a recession and mixed economic news has made mortgage rates increasingly volatile over the past several months.

The rising rates are leading to stagnation in the housing market, said Sam Khater, Freddie Mac’s chief economist.

“As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month,” said Khater. “Many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.”

The average mortgage rate is based on a survey of conventional home purchase loans for borrowers who put 20% down and have excellent credit, according to Freddie Mac. But many buyers who put down less money up front or have less than perfect credit will pay more.

Inflation remains stubborn

While the Fed does not set the interest rates borrowers pay on mortgages directly, its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds. As investors see or anticipate rate hikes, they make moves which send yields higher and mortgage rates rise.

This week the 10-year yield remained above 4%, a level last seen in 2008.

Investors are anticipating another rate hike at next week’s Fed meeting, said Hannah Jones, economic data analyst at

Analysts expect the central bank to announce another 75-basis-point hike since the most recent inflation data has not shown sufficient signs of cooling. If that happens, it will be the fourth 75-basis-point hike in a row, marking the largest series of Fed rate hikes in more than three decades.

Affordability continues to take a hit

Higher mortgage rates are making it even harder for prospective buyers to afford a home.

Over the past year, mortgage rates have climbed nearly four percentage points and listing prices have increased 13.9%. That has made the monthly payment on a median priced home close to 75% higher today compared to one year ago, according to

At this time last year, a buyer who put 20% down on a $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 3.14% had a monthly mortgage payment of $1,339, according to calculations from Freddie Mac.

Today, a homeowner buying the same priced house with an average rate of 7.08% would pay $2,093 a month in principal and interest. That’s $754 more each month.

“Home shoppers are hamstrung by the rising cost of homeownership and inflation, which has led many to drop out of the market,” said Jones. She pointed to the recent report on existing home sales, which declined 23.8% year-over-year in September marking the eighth consecutive month of slowing, according to the National Association of Realtors.

Demand for mortgages has dropped dramatically as well, with applications at their slowest pace since 1997, according to the Mortgage Bankers Association.

Homebuyers who remain on the hunt are finding homes they can afford in lower priced markets, Jones said. “As a result, affordable markets are seeing sustained housing demand.”

But as long as mortgage rates and prices remain high, Jones said, many buyers will remain on the sidelines or downsize their expectations.

“Some may find renting to be the better option in the short term, while others may consider other home types such as condos,” said Jones. “Buyers who remain in the market may see lower prices and have some leverage relative to the last few months, though they will have to be cognizant of how higher mortgage rates impact housing costs.”