• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.16% from 7.09%.
• Mortgage demand from homebuyers was 26% lower than the same week one year ago.
• Applications to refinance a home loan fell 2% for the week and were 35% lower than the same week one year ago.

US mortgage rates surged this week, rising to their highest level in 21 years.

The 30-year fixed-rate mortgage averaged 7.09% in the week ending August 17, up from 6.96% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.13%.

Rates have been above 6.5% since the end of May and climbing higher since mid-July. The last time rates were over 7% was in November of last year when they hit 7.08%. This week’s average rate is the highest the 30-year, fixed-rate mortgage has been since April 2002 when it was 7.13%.

Mortgage rates have spiked during the Federal Reserve’s historic rate-hiking campaign sending home affordability to its lowest level in several decades. Buying a home is more expensive because of the added cost of financing the mortgage, and homeowners who previously locked in lower rates are reluctant to sell. The combination of low inventory and high costs has squeezed would-be homebuyers, sending home sales about 20% lower than a year ago.

“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s chief economist. “Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales.”

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.