Interest payments for the U.S. benchmark 30-year-fixed rate mortgage saw the largest one-week upward movement in 35 years, hitting 5.78 percent as of Thursday.

The rate jumped more than half a percentage point in the last week and is nearly double what it was a year ago, according to government-backed mortgage lender Freddie Mac.

That means a monthly mortgage payment on a roughly median-valued $400,000 home, after a 20 percent down payment, would now be $1,874. Last year, the monthly payment on the same home would have been $1,335 — a difference of more than $500.

The spiking mortgage rate comes as the Federal Reserve announced this week its own 75-basis point rate hike in the federal funds rate, which determines the lending rates used by financial institutions.

The uptick was higher than the 50-basis point hike the Fed had originally signaled as part of the central bank’s battle against inflation, which stands now at 8.6 percent, a 40-year high.

The higher mortgage rates "are the result of a shift in expectations about inflation and the course of monetary policy,” Sam Khater, chief economist with Freddie Mac, said in a statement.

“Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market,” Khater said.

The latest data on the 15-year fixed-rate mortgage puts it at 4.81 percent, up from 2.24 percent this time last year. The 5-year adjustable rates mortgage hit 4.33 percent this week, up from 2.52 percent last year.

Mortgage rates are translating into diminished home sales as well as reduced home construction rates, as the housing market cools off in the wake of the broader economic recovery from the pandemic.

The Mortgage Bankers Association (MBA) trade group reported this week that their purchasing index is 16 percent lower than it was a year ago and home refinancing is more than 70 percent lower since last year.

“MBA is forecasting that mortgage rates are likely to plateau near current levels,” MBA economist Mike Fratantoni said in a statement. “The financial markets have attempted to price in the impact of Fed actions over this cycle, and they are likely also pricing in the economic slowdown that will result. Once we are past this rate spike and associated volatility, MBA expects that potential homebuyers may be more willing to re-enter the market.”

New home construction dropped by 14.4 percent in May from April and is down 3.5 percent since last year, according to the U.S. Census Bureau. Single-family new home construction fell 9.2 percent on the month.

WASHINGTON (AP) — Federal Reserve officials are signaling that they will take an aggressive approach to fighting high inflation in the coming months — actions that will make borrowing sharply more expensive for consumers and businesses and heighten risks to the economy.

In minutes from their policy meeting three weeks ago released Wednesday, Fed officials said that half-point interest rate hikes, rather than traditional quarter-point increases, "could be appropriate" multiple times this year.

At last month's meeting, many of the Fed policymakers favored a half-point increase, the minutes said, but held off then because of the uncertainties created by Russia's invasion of Ukraine. Instead, the Fed raised its key short-term rate by a quarter-point and signaled that it planned to continue raising rates well into next year.

The minutes said the Fed is also moving closer to rapidly shrinking its huge $9 trillion stockpile of bonds in the coming months, a move that would contribute to higher borrowing costs. The policymakers said they would likely cut their holdings by about $95 billion a month — nearly double the pace they implemented five years ago, when they last shrank their balance sheet.

The plan to quickly draw down their bond holdings marks the latest move by Fed officials to accelerate their inflation-fighting efforts. Prices are surging at the fastest pace in four decades, and officials in recent speeches have expressed increasing concern about getting inflation under control.

Many economists have said they worry that the Fed has waited too long to start raising rates and could be forced to respond so aggressively as to trigger a recession. Indeed, economists at Deutsche Bank predict that the economy will tumble into a recession late next year, noting that the Fed, "finding itself now well behind the curve, has given clear signals that it is shifting to a more aggressive tightening mode."

The stock market sold off when the minutes were released Wednesday but later recovered most of its losses. Still, the S&P 500 was down nearly 0.8 percent in afternoon trading after a sharp drop on Tuesday.

Financial markets now expect much steeper rate hikes this year than Fed officials had signaled as recently as their meeting in mid-March. Just three weeks ago, the policymakers projected that the Fed's benchmark rate would remain below 2 percent by the end of this year and 2.8 percent at the end of 2023, up from its current level below 0.5 percent.

But Wall Street now forecasts that the Fed's rate will reach 2.6 percent by year's end, with further rate hikes next year. That would require three half-point increases this year.

Higher rates from the Fed will heighten borrowing costs for mortgages, auto loans, credit cards and corporate loans. By doing so, the Fed hopes to cool economic growth and rising wages enough to rein in high inflation, which has caused hardships for millions of households and poses a severe political threat to President Biden.

Chair Jerome Powell opened the door two weeks ago to increasing rates by as much as a half-point at upcoming meetings, rather than by a traditional quarter-point. The Fed hasn't carried out any half-point rate increases since 2000. Lael Brainard, a key member of the Fed's Board of Governors, and other officials have also made clear that they envision such sharp increases. Most economists now expect the Fed to raise rates by a half-point at both its May and June meetings.

In a speech Tuesday, Brainard underscored the Fed's increasing aggressiveness by saying that the central bank's bond holdings will "shrink considerably more rapidly" over "a much shorter period" than the last time the Fed reduced its balance sheet, from 2017 to 2019. At that time, the balance sheet was about $4.5 trillion. Now, it's twice as large.

After the pandemic hammered the economy two years ago, the Fed bought trillions in Treasury and mortgage bonds, with the goal of lowering longer-term borrowing rates. It also cut its short-term benchmark rate to near zero.

As a sign of how fast the Fed is reversing course, the last time the Fed bought bonds, there was a three-year gap between when it stopped its purchases, in 2014, and when it began reducing the balance sheet, in 2017. Now, that shift is likely to happen in as few as three months.

Brainard's remarks caused a sharp rise in the interest rate on the 10-year Treasury note, a key rate that influences mortgage rates, business loans and other borrowing costs. On Wednesday, that rate reached 2.6 percent, up from 2.3 percent just a week earlier, a sharp increase for that rate. A month ago, it was just 1.7 percent.

Shorter-term bond yields have jumped even higher, in some cases to above the 10-year yield, a pattern that has in the past been seen as a sign of an impending recession. Fed officials say, however, that shorter-term bond market trends aren't flashing the same warning signals.

The Fed will reduce its balance sheet by allowing some of its Treasurys and mortgage-backed securities to mature without reinvesting the proceeds, which it has done for the past two years.

What kind of impact this will have on interest rates is highly uncertain. Powell said at a news conference after last month's meeting that the reduction in bond holdings would be equivalent to another rate hike. Economists estimate that reducing the Fed's balance sheet by $1 trillion a year would be equal to anywhere from one to three additional quarter-point increases in the Fed's benchmark short-term rate.

Treasury Secretary Janet Yellen, who preceded Powell as Fed chair, suggested during a congressional hearing Wednesday that Russia's invasion of Ukraine would likely keep escalating inflation in the coming months.

"The sanctions we've placed on Russia are pushing up the price of energy," Yellen said. "When energy prices are going up, the price of wheat and corn that Russia and Ukraine produce are going up, and metals that play an important industrial role are going up."