Mortgage rates have jumped back above 7%, after dropping last week. The 30-year fixed-rate mortgage averaged 7.08% in the week ending November 10, up from 6.95% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate stood at 2.98%. Mortgage rates have risen throughout most of 2022, spurred by the Federal Reserve’s unprecedented campaign of hiking interest rates in order to tame soaring inflation. Last week, the Fed announced it would raise interest rates by another 75 basis points, the sixth rate increase this year and the fourth-consecutive hike of that size. While the Labor Department announced Thursday that consumer prices rose in October by 7.7% from a year ago, less than expected, the Fed still has far to go in its effort to tame inflation. “The housing market is the most interest-rate sensitive segment of the economy, and the impact rates have on homebuyers continues to evolve,” said Sam Khater, Freddie Mac’s chief economist. “Home sales have declined significantly and, as we approach year-end, they are not expected to improve.” 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. Affordability is not improving With mortgage rates up four percentage points from a year ago, buyers’ purchasing power has plummeted. That has pushed many buyers out of the market and those who remain may need to look at a lower price point or make compromises on the location, size, or condition of a house in order to find one that is affordable. “The key to making a good decision in this challenging housing market is to be laser focused on what you need now and in the years ahead, so that you can stay in your home long enough that buying is a sound financial decision,” said Danielle Hale, Realtor.com’s chief economist. Based on September 2021’s median home price and 30-year fixed mortgage rate, a typical homebuyer with a 20% down payment would have been looking at a $1,187 monthly payment last year, according to calculations from Freddie Mac. This year, due to both higher prices and mortgage rates that are hovering around 7%, a typical buyer is facing a $2,065 monthly payment. That is $878 more a month. Because of this drastic change in the cost to finance a home, sales have dropped for eight months running, according to the National Association of Realtors. A survey from Fannie Mae showed that only 16% of people think this is a good time to buy a home, a record low. But last week’s mortgage applications ticked up slightly for the first time in six weeks, according to the Mortgage Bankers Association, indicating that some people are still buying homes. “The desire for homeownership is strong,” said Bob Broeksmit, president and CEO of the MBA. “Many prospective buyers are waiting for the volatility in mortgage rates to subside, as well as for a clearer picture of the economic outlook.” 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.