Washington, DC CNN  — 

Mortgage rates bounced back up this week after falling for two weeks in a row.

The 30-year fixed-rate mortgage averaged 6.39% in the week ending May 18, up from 6.35% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.25%.

Economic crosscurrents have kept rates within a 10-basis point range over the last several weeks, said Sam Khater, Freddie Mac’s chief economist.

“While affordability remains a hurdle, homebuyers are getting used to current rates and continue to pursue homeownership,” said Khater.

Mortgage rates topped 5% for the first time since 2011 a little more than a year ago, and have remained over 5% for all but one week during the past year. Since then they have gone as high as 7.08%, last reached in November.

Over the last month, rates have gone up and down, but have stayed under 6.5%.

“Mortgage rates have remained in the roughly 6% to 7% range for the last eight months and will likely remain in this range until incoming economic data makes the economy’s path forward more clear,” said Hannah Jones, Realtor.com economic data analyst. “Buyer demand has been sensitive to the ebb and flow of mortgage rates, but near-peak home prices and elevated inflation mean many would-be buyers are still waiting on the sidelines.”

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.

Inflation is cooling, but debt limit uncertainty looms

Mortgage rates went up following a rise in the 10-year Treasuries this week, as investors continue to digest data related to inflation and keep their eye on the ongoing standoff in Washington about raising the debt limit, which is creating uncertainty.

While inflation is cooling, recent data shows signs of a stubborn, though slowing economy, said Jones, suggesting that the Federal Reserve’s rate hikes are having the intended effect. However, inflation remains well above the central bank’s target level and unemployment remains near all-time lows.

If a deal is not reached providing an extension of the debt limit, the United States would default on its debts for the first time. This could further crush an already struggling housing market, sending the cost to purchase a home up 22% and spiking mortgage rates to over 8%, according to one projection.

“The economy remains on fragile footing and a US default would cause an interest rate spike that could erase any progress towards a healthier housing market by cutting deeper into home sales,” said Jones.

A default remains unlikely, but, Jones said, the closer we get to a possible event date — which could be as soon as June 1 — without an increase in the debt limit, the more households will be hurt by higher interest rates.

“The sooner the debt impasse is resolved, the less likely it is to negatively affect households already plagued by high prices,” she said.

Buyers remain rate sensitive

Home shoppers who are facing higher mortgage rates are also facing low inventory of homes to buy and still-strong competition from other buyers, especially at entry- and middle-level prices. Even though housing sales are down, demand for the few homes coming to market in an area can result in a bidding war that pushes prices higher.

This makes buyers even more rate sensitive, as they calculate how much house they can afford.

“Higher rates and low inventory levels continue to keep many prospective first-time buyers on the sidelines,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association. “Purchase applications for FHA loans — popular with many first-timers — were down 5% from last week and 17% from a year ago.”

Inventory is low because many homeowners who may otherwise put their home on the market are holding back and holding on to a mortgage rate several percentage points lower than a rate they’d take on by buying another home.

“Constrained buyers and reluctant sellers mean the spring market hasn’t picked up as much momentum as in years past, but each improvement in affordability is met with an increase in buyer activity,” said Jones. “Prices are likely to remain elevated in many markets where low inventory, especially at an affordable price point, is creating a competitive environment.”