US mortgage rates hit 21-year high, impacting housing market

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US mortgage rates hit 21-year high, impacting housing market

Mortgage rates in the United States have reached a 21-year peak, surpassing 7.5% for the first time since November 2000, according to data from the Mortgage Bankers Association. The significant increase is largely attributed to the Federal Reserve's aggressive rate hikes.

A survey conducted by the Mortgage Bankers Association revealed that US mortgage rates peaked at 7.53% on Wednesday. This surge in rates has led to escalating costs for households, with a $400,000, 30-year mortgage now demanding almost $1,000 more monthly than last year.

The rising rates have also resulted in a downturn in home purchase applications, which have plunged to their lowest level since 1995. This decline is due to exorbitant interest and property prices, leading to a deadlock in the real estate sector.

Data from Zillow (NASDAQ: ZG ) indicates an increase in sellers cutting asking prices, further highlighting the strain on the housing market. Additionally, Mortgage News Daily predicts further increases in mortgage rates, a forecast supported by rising 10-year US Treasury bond yields—the highest since 2007—fueled by unexpected job openings signifying labor market tightness and persistent inflation.

These economic indicators suggest that most US officials expect elevated rates to persist beyond the Federal Reserve's final two meetings of 2023.

JP Morgan CEO Jamie Dimon issued a cautionary statement regarding future interest rates. Despite these challenges, a strong labor market is maintaining consumer spending levels.

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