(Reuters) – The U.S.’s most popular home loan interest rate rose last week for the fourth consecutive week. Residential real estate borrowing costs are now at their highest level in almost two years. This is because financial markets expect that the Federal Reserve would raise rates faster and sooner than expected to fight inflation.

According to the Mortgage Bankers Association, Wednesday’s weekly average of the 30-year fixed-rate mortgage contract rate rose from 3.52% one week ago to 3.64%. It was the highest rate since March 2020, the time when the pandemic led to a recession. Borrowing costs plummeted to historical lows after the Fed reduced its benchmark interest rates to nearly zero.

Inflation running at an all-time high and the unemployment rate nearing full employment, the Fed can now be seen quickly reducing the level of accommodation it has put in place for the spring 2020. The financial markets are scrambling to get a rate rise by the Fed by mid March.

This reset has led to an increase in the yields of Treasury securities, which influence mortgage rates. Home financing costs also have followed suit. MBA’s 30-year contract has increased from 3.27% mid-December.

Although the rate increase is impacting mortgage refinance applications, it appears that it’s helping to boost home-purchase loan applications. Last week saw the biggest rise in application volume in six months as potential buyers sought to lock in historically low rates.

Last week’s overall loan volume increase was 2.3%, aided by a 7.9% jump in home-buying loans. However refinance applications declined 3.1% to their lowest levels in two years.