Home loan borrowing costs climbed again this week, pushing the average long-term U.S. mortgage rate to its highest level in nearly 23 years, another blow to prospective homebuyers facing an increasingly unaffordable housing market.

The average rate on the benchmark 30-year home loan rose to 7.31%, from 7.19% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.70%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loan, also increased. The average rate rose to 6.72% from 6.54% last week. A year ago, it averaged 5.96%, Freddie Mac said.

“The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” said Sam Khater, Freddie Mac’s chief economist. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”

High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans. They also discourage homeowners who locked in rock-bottom rates two years ago from selling. The average rate on a 30-year mortgage is now more than double what it was two years ago, when it was just 3.01%.

The combination of elevated rates and low home inventory has worsened the affordability crunch by keeping home prices near all-time highs even as sales of previously occupied U.S. homes have fallen 21% through the first eight months of this year versus the same stretch in 2022.

This is the third consecutive week that mortgage rates have moved higher. The weekly average rate on a 30-year mortgage has remained above 7% since mid August and is now at the highest level since mid-December 2000, when it averaged 7.42%.

Mortgage rates have been climbing along with the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield has surged in recent weeks amid worries that the Federal Reserve will keep short-term interest rates higher for longer to fight inflation.

The central bank has already pulled its main interest rate to the highest level since 2001 in hopes of extinguishing high inflation, and it indicated last week it may cut rates by less next year than earlier expected.

The threat of higher rates for longer has pushed Treasury yields to heights unseen in more than a decade. The yield on the 10-year Treasury was at 4.61% in midday trading Wednesday. It was at roughly 3.50% in May and just 0.50% early in the pandemic.

While mortgage rates don’t necessarily mirror the Fed’s rate increases, they tend to track the yield on the 10-year Treasury note. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can influence rates on home loans.

(AP)