The rate rose to 6.95% from 6.86% last week, mortgage buyer Freddie Mac said Wednesday. A year ago, the rate averaged 6.81%.

The uptick follows a four-week pullback in the average rate, which has mostly hovered around 7% this year.

When rates rise they can add hundreds of dollars a month in costs for borrowers. The elevated mortgage rates have been a major drag on home sales, which remain in a slump dating back to 2022.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose this week, pushing the average rate to 6.25% from 6.16% last week. A year ago, it averaged 6.24%, Freddie Mac said.

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The yield, which topped 4.7% in late April, has been generally declining since then on hopes that inflation is slowing enough to get the Fed to lower its main interest rate from the highest level in more than two decades.

Fed officials have said that inflation has moved closer to the Fed’s target level of 2% in recent months and signaled that they expect to cut the central bank’s benchmark rate once this year.

But until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to budge from where they are now.

Most economists think the Fed’s first rate cut will occur in September, with potentially another cut by year’s end. But mortgage rates could begin easing in coming weeks, if bond yields move lower in anticipation of a Fed rate cut, said Lisa Sturtevant, chief economist at Bright MLS.

“While today’s report is not what homebuyers were hoping for, we may actually start to see rates fall sooner than expected,” she said.

Mortgage rates fell to historic lows during the pandemic, setting off a homebuying frenzy that sent home prices soaring. Between 2019 and 2023, the median national sales price of previously occupied U.S. homes jumped more than 43%. And despite declining sales this year, home prices hit an all-time high in May of $419,300.

High home loan borrowing costs and record-high home prices discouraged many would-be homebuyers this spring, traditionally the busiest period of the year for the housing market.

Sales of previously occupied U.S. homes fell in May for the third month in a row, and indications are that June saw a pullback as well.

Most economists’ projections call for the average rate on a 30-year home loan to remain above 6% this year. That’s still double what the average rate was just three years ago.

“We are still expecting rates to moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers,” said Sam Khater, Freddie Mac’s chief economist.