The average long-term US mortgage rate edged up to 7.18% this week, where it stood two weeks ago

LOS ANGELES (AP) — The average long-term U.S. mortgage rate edged up this week, pushing higher the borrowing costs for prospective homebuyers already facing a housing market limited by a dearth of homes for sale and rising prices.

The average rate on the benchmark 30-year home loan rose to 7.18% from 7.12% last week, according to Mortgage buyer Freddie Mac on Thursday. A year ago, the rate averaged 6.02%.

The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, fell to 6.51% from 6.52% last week. A year ago, it averaged 5.21%, Freddie Mac said.

High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already unaffordable to many Americans. They also discourage homeowners who locked in low rates two years ago from selling.

Mortgage rates have been climbing in recent weeks, echoing moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans.

The yield, which three weeks ago neared its highest level since 2007, has been hovering above 4% since August as bond traders weigh whether recent economic data increase the likelihood that the Federal Reserve will decide it needs to keep interest rates higher for longer to lower inflation.

On Thursday, traders pared back expectations for the Fed to raise rates again some time this year, though they’re still betting on a nearly 42% chance of that, according to data from CME Group.

The yield on the 10-year Treasury note was trading at 4.28% midday Thursday.

“Mortgage rates inched back up this week and remain anchored north of 7%,” said Sam Khater, Freddie Mac’s chief economist. “The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated."

High inflation drove the Federal Reserve to raise its benchmark interest rate 11 times since March 2022, lifting the fed funds rate to the highest level in 22 years. 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.

The average rate on a 30-year mortgage remains more than double what it was two years ago, when it was just 2.86%. Those ultra-low rates spurred a wave of home sales and refinancing. The sharply higher rates now are contributing to a dearth of available homes, as homeowners who locked in those lower borrowing costs two years ago are now reluctant to sell and jump into a higher rate on a new property.

The lack of housing supply has weighed on sales of previously occupied U.S. homes, which are down 22.3% through the first seven months of the year versus the same stretch in 2022.