Mortgage rates rise to 5.81%, highest since 2008

Mortgage rates in the US climbed again, almost reaching a 14-year high.

The average for a 30-year loan was 5.81%, up from 5.78% last week, Freddie Mac said in a statement Thursday. The latest gain follows the biggest one-week jump since 1987. This time last year, rates averaged 3.02%, and the last time rates were this high was in November 2008 amid a bursting real estate bubble that would plunge the global economy into the Great Recession.

The massive run-up in mortgage rates this year has fueled 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 two 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 leveling off the last two 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 Inc. 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.”

PS: Some may note that mortgage rates remain well below historical highs notched during the past 40 years — notably the record 18.63% average rate in October 1981. But this week’s 5.81% rate equals the average rate since 1991.

Bloomberg, CNN and the Southern California News Group’s Jonathan Lansner contributed to this report.

Source: Orange County Register