By Amina Niasse

NEW YORK Key U.S. mortgage interest rates fell for a second week but held above 7% and remained near the highest in decades, according to a survey released Thursday by housing finance giant Freddie Mac.

The average contract rate on 30-year-fixed-rate mortgages declined to 7.12% as of Thursday from 7.18% the prior week, Freddie Mac said.

Mortgage rates climbed steadily over the past two years on the back of the Federal Reserve's rate hikes, and they recently spiked to the highest rate in more than two decades.

“For the fourth consecutive week, the 30-year fixed-rate mortgage hovered above 7%,” said Sam Khater, chief economist at Freddie Mac. “The economy remains buoyant, which is encouraging for consumers. Though while inflation has decelerated, firmer economic data have put upward pressure on mortgage rates which, in the face of affordability challenges, are straining potential home buyers.”

The Fed's rate hikes have slowed the pace of home sales, but some economists expect the “staring contest” between home owners and buyers to end before too long, said Andrew Flowers, lead labor economist at Appcast Inc.

"If the new normal is 7%, then the strong labor markets will lead a lot of home buyers back into the housing market at some point," he said.

(Reporting by Amina Niasse; Editing by Cynthia Osterman)