This week has brought a startling development for anyone looking to buy a new home, as the average long-term mortgage rate in the U.S. has jumped above 7% for the first time in almost six months. This surge has left prospective homebuyers facing some tough financial decisions and much uncertainty about the future.

Freddie Mac has reported that the average rate on a 30-year mortgage has climbed to 7.1% from 6.88% just last week. This drastic increase is quite a departure from the relatively steady rates that we have seen over the last few months. Many people are now left wondering where the housing market is headed.

The impact of this rate hike is significant. Higher mortgage rates mean higher monthly payments, which can add hundreds of dollars to a borrower’s expenses each month. This drastically reduces their buying power at a time when the housing market is already tight, with fewer homes available for sale and prices continuing to rise.

Sam Khater, the chief economist at Freddie Mac, points out the difficult choices facing potential buyers: “As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year.” The uncertainty adds another layer of complexity to an already challenging market.

This spike in mortgage rates follows reports of stronger-than-expected performance in employment and inflation, throwing the Federal Reserve’s interest rate strategy into question and causing bond yields to rise. This volatility has only added to the already high tension in the housing market.

Recent comments from Federal Reserve officials have suggested that there might be a pause in interest rate adjustments until there’s more confidence that inflation is on track to meet the Fed’s targets. This cautious stance has led to a surge in the yield on the 10-year Treasury, reaching its highest levels in months.

These developments have had a direct impact on mortgage rates, which have continued to rise for three consecutive weeks. This trend is a significant blow to prospective homebuyers during what is traditionally the busiest time of year for the housing market.

The effects are already being felt, with home sales dropping as buyers face the dual challenge of high mortgage rates and elevated home prices. Even though there was a brief period of relief in January and February when mortgage rates eased a bit, the current average rate for a 30-year mortgage is still much higher than it was two years ago.

Looking forward, economists are cautious. They expect only a slight decrease in mortgage rates later this year, but the average rate for a 30-year home loan is likely to remain above 6% for the foreseeable future.

Refinancing has also become more costly. The average rate for a 15-year fixed-rate mortgage, which many homeowners use for refinancing, has risen to 6.39% from 6.16% last week. This increase makes it even harder for homeowners to reduce their mortgage payments amidst rising rates.

As we deal with this unexpected surge in mortgage rates, the housing market is preparing for what’s ahead. With affordability slipping farther out of reach for many, both prospective homebuyers and current homeowners are facing a challenging road ahead.