Mortgage rates surpassed 7% for the first time since April 2002, adding more reason for price-struck homebuyers to stay on the sidelines.

The rate on the average 30-year fixed mortgage hit 7.08%, up from 6.94% the week prior, according to Freddie Mac. Rates have jumped 3.86 percentage points since the start of the year, the largest year-to-date increase in over 50 years.

The dramatic increase in rates – driven by the Federal Reserve’s aggressive fight on inflation – has crushed homebuyer demand, while home sellers continue to lose confidence as price reductions become more common.

“With mortgage rates and inflation continuing to put pressure on homebuyers, demand will remain quite soft and in turn, I do see that continuing to push prices downward,” George Ratiu, senior economist and manager of economic research for Realtor.com, told Yahoo Money. “The big question is what needs to happen so we can see lower prices. It’s unsustainable to expect that prices can continue at elevated levels.”

Rate hikes spook homebuyers

Demand for mortgages remained at its lowest point in 25 years last week, the Mortgage Bankers Association survey for the week ending October 21 found, as higher rates and economic uncertainty continue to erode buyer confidence. The volume of mortgage applications for purchases decreased 2% from one week earlier, and was 42% lower than the same week a year ago.

Rate hikes have caused the share of homebuyers to shift toward lower interest rate products, MBA data showed, such as Federal Housing Administration loans and adjustable-rate mortgages (ARMs) to ease the financial burden.

“Homebuyers feel they are in a race — Fed versus affordability — with a very little chance of winning,” Adriana Perezchica, president of Via Real Estate, told Yahoo Money. “I’ve been receiving calls from buyers trying to get qualified or just starting to explore the options to buy, I can hear on their voice the uncertainty of times to come, they really would like to get into a home, however the climate has not been very favorable and payments are unreachable, they have to settle for the minimum approved at nonexistent prices in the current market.”