A carpenter works on building new townhomes that are still under construction in Tampa, Florida, US, May 5, 2021. (OCTAVIO JONES / REUTERS)

The average interest rate on the most popular US home loan rose to its highest level since 2006 as the housing sector continued to bear the brunt of tightening financial conditions, data from the Mortgage Bankers Association showed on Wednesday.

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Mortgage rates have more than doubled since the beginning of the year as the Federal Reserve pursues an aggressive path of interest rate hikes to bring down stubbornly high inflation

Mortgage rates have more than doubled since the beginning of the year as the Federal Reserve pursues an aggressive path of interest rate hikes to bring down stubbornly high inflation.

Those actions, designed to cool the economy sufficiently to curb price pressures, have weighed heavily on the interest-rate-sensitive housing sector as expectations for Fed tightening have led to a surge in Treasury yields. The yield on the 10-year note acts as a benchmark for mortgage rates.

The average contract rate on a 30-year fixed-rate mortgage rose by 6 basis points to 6.81 percent for the week ended Oct 7 while the MBA's Market Composite Index, a measure of mortgage loan application volume, fell 2.0 percent from a week earlier and is down roughly 69 percent from one year ago.

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Its Purchase Index, a measure of all mortgage loan applications for purchase of a single family home, fell 2.1 percent from the prior week and is 39 percent lower than a year ago, while MBA's refinance Index declined 1.8 percent last week and is down 86 percent from one year ago.

Homebuilding and sales have weakened significantly in recent months, with home resales posting seven straight months of declines. However, home prices remain high even as house price growth slows, eroding affordability for buyers who are still competing due to a shortage of properties for sale.