It's a double blow for homebuyers who are considering buying. It's becoming harder and more expensive to qualify for loans, as interest rates continue to rise.

Mortgage News daily reported that the average rate on the popular 30-year fixed-rate mortgage increased by more than 7 percent at the end last week. This rate will likely rise to around 7.125% Tuesday. It has been hovering around 7% for several consecutive days.

In the meantime, mortgage credit availability is at its lowest since March 2013, when housing experienced a slow recovery following the financial crisis. According to the Mortgage Bankers Association's monthly index, it fell 5.4% in September for the seventh month.

Lenders may be in desperate need of business as the mortgage demand falls due to lower rates. However, they are also more worried about a weaker economy which could lead to higher defaults. Executives and economists warn the U.S. might fall into recession as interest rates are raised by the Federal Reserve to combat high inflation.

Joel Kan, a Mortgage Bankers Association economist said that there was a lower appetite for lower credit scores and high [loan–to-value] loans programs.

The current record-low levels of mortgage delinquencies is nearing the end of August. Black Knight, a mortgage software-analytics company, said that although foreclosure actions saw a 15% increase in August, they still remained 44% below prepandemic levels.

According to The Mortgage Bankers Association the lowest credit availability was for jumbo loan, which are more difficult to obtain due to higher home values. Higher prices also have more borrowers turning to adjustable-rate mortgages, because they offer lower interest rates. These loan rates can be fixed for up to 10 years, but they are considered riskier mortgages.

Borrowers are clearly concerned that mortgage rates will move even higher. Although mortgage rates don't always follow the federal fund rate exactly, they are heavily influenced and influenced by Fed policies.

"The Fed is determined to hike rates as high as it can and keep them there as long as it can, even if that means the economy suffers," Matthew Graham, chief operating officer of Mortgage News Daily, wrote on its website.

Graham said that the Fed has not considered mortgage rates or the market for housing because prices of homes are high. Therefore, a correction is needed.