WASHINGTON (AP) — Average long-term U.S. mortgage rates retreated modestly this week, but interest on the key 30-year loan remains at decade-high levels.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate slipped to 5.25% from 5.3% last week. By contrast, the average rate stood at 3% a year ago.

Earlier this month, the Federal Reserve intensified its fight against the worst inflation in 40 years by raising its benchmark interest rate by a half-percentage point and signaling more big rate hikes to come. The Fed’s move, its most aggressive since 2000, will mean higher costs for mortgages as well as credit cards, auto loans and other borrowing for individuals and businesses.

Last week, the government reported that U.S. producer prices soared 11% in April from a year earlier, a hefty gain that indicates high inflation for consumers and businesses will linger in the months ahead. In a separate report last week, government data showed that consumer prices jumped 8.3% last month from a year ago, just below the 8.5% year-over-year surge in March, which was the highest since 1981.

Homeownership has become an increasingly difficult aspiration recently, especially for first-time buyers. Besides staggering inflation, rising mortgage rates and higher home prices, the supply of homes for sale continues to be scarce.

Sales of previously occupied U.S. homes slowed for the third consecutive month in April as mortgage rates surged, driving up borrowing costs for would-be buyers as home prices soared to new highs.

The National Association of Realtors reported Thursday that existing home sales fell 2.4% last month to a seasonally adjusted annual rate of 5.61 million. After climbing to a 6.49 million annual rate in January, sales have fallen to the slowest pace since June 2020.

The median home price in April jumped 14.8% from a year ago at this time to $391,200. That’s an all-time high according to data going back to 1999, NAR said.

Some economists predict that home sales this year could decline as much as 10% from 2021 levels.

“Economic uncertainty is causing mortgage rate volatility,” said Freddie Mac Chief Economist Sam Khater. “As a result, purchase demand is waning, and homebuilder sentiment has dropped to the lowest level in nearly two years.”

Khater noted that builders are also facing rising costs.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, slipped to 4.43% from 4.48% last week. That rate was 2.29% a year ago.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.