The Federal Reserve's latest jumbo interest rate hike will weigh down on the US housing market even further, Freddie Mac's chief economist has warned, even as mortgage rates decline back from their highest level in 20 years.

The 30-year fixed mortgage rate averaged 6.95% as of Thursday, a weekly update from Freddie Mac showed. The rate hit 7.08% the week before, blasting above 7% for the first time in two decades.

But Sam Khater, the mortgage giant's chief economist, was downbeat on the prospects for the housing market after the Fed brought in its fourth consecutive 75 basis point hike on Wednesday. 

"Mortgage rates continue to hover around seven percent, as the dynamics of a once-hot housing market have faded considerably," Khater said.

"Unsure buyers navigating an unpredictable landscape keeps demand declining, while other potential buyers remain sidelined from an affordability standpoint," he added.

"Yesterday's interest rate hike by the Federal Reserve will certainly inject additional lead into the heels of the housing market."

The US central bank's latest hike lifted the benchmark interest rate to a range of 3.75% to 4% — the highest level since 2008. 

Even though the 30-year mortgage rate slumped last week, the 6.95% level is still more than twice as high as at the beginning of 2022 and compares with 3.09% a year ago. 

Jacked-up borrowing costs have made it much harder for potential homebuyers to enter the market.

Meanwhile, fears about a coming recession and high inflation have also dampened demand. Demand for mortgages last week fell for the sixth time in a row, according to Mortgage Bankers Association out Wednesday.

Soaring mortgage rates have sparked concern among market strategists that the US housing market is in freefall, with home prices at risk of plunging as much as 20%.