The average rate on the popular 30-year fixed mortgage crossed over 7% on Monday for the first time since December, hitting 7.04%, according to Mortgage News Daily.

It comes after the rate took the sharpest jump in more than a year Friday, after the January employment report came in much higher than expected. Rates then moved up even more Monday after a monthly manufacturing report came in high as well.

Mortgage rates have been on a wild ride since the summer, briefly crossing to a 20-year high of 8% in October. Rates then fell sharply, as investors saw more and more evidence that the Federal Reserve would end its latest phase of interest rate increases.

Mortgage rates do not follow the Fed directly, but they follow loosely the yield on the 10-year Treasury, which is heavily influenced by the central bank’s impression of the economy at any given time.

“The rapid increase in rates over the past two days is actually not too surprising given the fact that the market was widely seen as overly optimistic on the Fed rate cut outlook. The Fed has repeatedly pointed to economic data having the final say in that outlook and data has been shockingly unfriendly to rates as of Friday morning’s jobs report,” said Matthew Graham, chief operating officer at Mortgage News Daily.

As mortgage rates fell over the past two months, buyers seemed to be returning to the market. That coincided with a slight uptick in the number of homes for sale. Total inventory, however, is still historically low and is keeping competition high. It is also keeping home prices stubbornly hot.

High prices and low supply combined to make 2023 the worst for home sales since 1995. Most predict 2024 will be better.

“The strong job market is good news for the spring buying season as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association.

Mortgage applications to purchase a home had been rising steadily, but fell back in the last few weeks, as mortgage rates edged higher. With the all-important spring housing market closing in, rates are more important than ever, given high and still-rising home prices.

The median price of an existing home sold in December (the most recent data) was $382,600, according to the National Association of Realtors, an increase of 4.4% from December 2022. That was the sixth consecutive month of year-over-year price gains. The median price for the full year was $389,800, a record high.

Given how high prices are, even small rate swings are having an outsized effect on monthly payments, which are the final determination of affordability. Just a half percentage point swing can cost or save a buyer more than $200 a month on the median-priced home. So what next?

“The future of rates in 2024 is all about ifs and thens,” said Graham. “If we see more data like last Friday’s jobs report, rates will have a hard time getting back below 7%. But inflation is even more important than the labor market. If inflation comes in cooler than expected, it could balance the outlook.”