Mortgage rates in the US rise to 5.81%, highest since 2008

MORTGAGE rates in the US climbed again, hovering near a 14-year high.

The average for a 30-year loan was 5.81 per cent, up from 5.78 per cent last week, Freddie Mac said in a statement on Thursday (Jun 23). The latest gain follows the biggest 1-week jump since 1987.

The massive run-up in mortgage rates this year has fuelled a sudden shift in the previously frenzied US housing market. More sellers in some of the hottest pandemic boomtowns are cutting prices. Sales of previously owned homes fell in May to the lowest level in nearly 2 years, according to data released this week.

"The combination of rising rates and high home prices is the likely driver of recent declines in existing home sales," said Sam Khater, Freddie Mac's chief economist. "However, in reality, many potential homebuyers are still interested in purchasing a home, keeping the market competitive but levelling off the last 2 years of red-hot activity."

The slowdown has led to major layoffs across the industry. The biggest US bank, JPMorgan Chase & Co., is laying off hundreds of home-lending employees and reassigning hundreds more. Brokerages Compass and Redfin Corp. are also cutting hundreds of workers.

"Market prices will continue adjusting to a smaller pool of qualified buyers and higher financing costs," George Ratiu, Realtor.com's manager of economic research, said in a note ahead of the data release. "The move from an overheated real estate market toward a more sustainable one will take some time." BLOOMBERG