The average long-term mortgage rate in the United States climbs to 6.57% this week, its highest level since mid-March

LOS ANGELES– The average long-term U.S. mortgage rate hit its highest level since mid-March this week, pushing up borrowing costs for potential buyers facing a housing market constrained by a shortage of homes for sale.

Mortgage buyer Freddie Mac said on Thursday the average rate on the benchmark 30-year home loan rose to 6.57% from 6.39% last week. A year ago, the average rate was 5.10%.

High rates can add hundreds of dollars a month to homebuyers, limiting what buyers can afford in a market that remains unaffordable for many Americans after years of soaring home prices and limited housing inventory.

The median monthly payment listed on loan applications for home purchases in April rose to $2,112, up nearly 12% from a year ago and 0.9% from to March, the Mortgage Bankers Association announced Thursday.

The average rate on a 30-year home loan has risen two weeks in a row, echoing movements in the 10-year Treasury yield, which lenders use as a guide for pricing loans.

The 10-year Treasury yield has mostly risen lately, climbing to 3.79% in afternoon trade on Thursday. Two weeks ago, it was at 3.39%.

The rise in bond yields comes as investors react to stronger than expected economic data and the implications this could have on whether the Federal Reserve will raise interest rates again next month.

Bond traders are also heeding the possibility of the US government defaulting on its debt as the White House and GOP leaders vie for a deal to raise the federal government’s debt ceiling so it can avoid a unprecedented default as of June 1.

“The U.S. economy is showing continued resilience which, combined with debt ceiling issues, has led to higher mortgage rates this week,” said Sam Khater, chief economist at Freddie Mac.

Concerns that the government could end up defaulting on its debt could lead creditors to demand higher interest rates on US Treasuries, which could lead to a ‘significant increase’ in borrowing costs , including mortgages, said Jiayi Xu, an economist at Realtor.com.

“Resolving the debt impasse as soon as possible would mitigate potential negative effects on the housing market, which is already struggling with high prices and high mortgage rates,” Xu said.

Investors’ expectations for future inflation, global demand for US Treasuries, and what the Fed is doing with interest rates influence mortgage rates.

The Fed has raised its benchmark interest rate 10 times in 14 months. At its latest meeting of policymakers, the central bank signaled that it could finally pause its year-long campaign of rate hikes, although a pause would likely only push mortgage rates slightly lower.

Low mortgage rates have helped fuel the housing market for much of the past decade, paving the way for borrowers to finance ever-higher home prices. This trend began to reverse just over a year ago, when the Fed began raising its short-term policy rate in an effort to slow the economy and calm the highest inflation since four decades.

The spring home buying season got off to a lackluster start this year as potential buyers grapple with higher borrowing costs and near-record home inventory on the market.

Sales of previously occupied U.S. homes fell 23.2% in the 12 months to April, marking nine consecutive months of annual sales declines of 20% or more, according to the National Association of Realtors. The national median home price fell to $388,800 last month, down 1.7% from a year earlier and the biggest year-over-year drop since January 2012.

The modest decline in home prices reflects fierce competition among buyers, especially those vying for the most affordable homes. At least a third of homes sold last month cost more than their list price, according to the NAR.

The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, rose to 5.97% this week from 5.75% last week. A year ago, it averaged 4.31%, Freddie Mac said.