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Ongoing strength in the U.S. economy drove mortgage rates up over 7% for the first time in eight months, casting doubt over a recovery in the housing sector.

The 30-year mortgage rate inched up to the highest level since May 2024. It averaged 7.04% as of Jan. 16, according to data released by Freddie Mac on Thursday.

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It’s up 11 basis points from the previous week — one basis point is equal to one-hundredth of a percentage point. The 30-year was up for the fifth week in a row.

A year ago, the 30-year averaged 6.6%.

Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.

Separate data by Mortgage News Daily said that the 30-year fixed-rate mortgage indicates that the 30-year has long been averaging over 7%. As of Thursday morning, the site quoted an average of 7.13% for the 30-year fixed-rate mortgage.

“The underlying strength of the economy is contributing to this increase in rates,” Freddie Mac’s chief economist, Sam Khater, said in a statement.

The financial markets expect the Federal Reserve to hold back on cutting interest rates, as the economy is doing fine at the current level.

The Federal Reserve’s monetary policy doesn’t directly impact mortgage rates; rather, the 30-year mortgage rate typically rises and falls in tandem with the yield on the 10-year Treasury note.

The 10-year yield has inched higher over the past few weeks, bringing the 30-year mortgage rate up along with it, as financial markets speculate about what the Fed will do next.

Higher mortgage rates have hammered home sales. Sales of previously owned homes are on track to be the worst year since 1995, according to the National Association of Realtors. As rates shot up over the first half of January, buyers have also pulled back on applying for mortgages, as seen by data from the Mortgage Bankers Association. Purchase applications are down 2% compared with the same period a year ago.

“The upward drift in mortgage rates – the result of ongoing financial market volatility and inflationary pressures – is dampening homebuyer demand,” Bob Broeksmit, president and chief executive of the trade group, said in a statement.