#509
Mortgage Madness
Published:
Oct 09, 2023
Author:
Sarah Parsons Wolter
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The upward swing of central bank interest rates across the globe has had different degrees of implications throughout housing markets. Amidst this global trend, specific nuances within regional markets have emerged in the international mortgage scene. Even within regions of a single currency area such as Europe, borrower preferences and the products lenders offer diverge dramatically.
For instance, France had greater protection from this environment as mortgages have tended to be fixed for decades with an average length of 23 years. On the other hand, Spain’s housing data shows that 75% of outstanding mortgages are variable, prompting families to explore alternative financial products to mitigate the impact. Across the Atlantic, the US mortgage sector is navigating a parallel yet distinct path. The housing market has felt the significant impact of interest rate hikes since early last year. This week, the Mortgage Bankers Association data showed that there was a decrease in mortgage applications in the past month as the US 30 year mortgage rate reached 7.5% - a level not seen since 2000!
In this evolving macroeconomic landscape, borrowers in particular are on the hunt for solutions aimed at easing mortgage monthly payments and enabling accessibility to the housing market. Each regional market, with its unique mortgage dynamics, might just be a canvas for disruptive fintech solutions.
Considering the structural differences around the world, perhaps we see disruption go the way of FIFA and incorporate cross border dynamics (as the sporting body just announced this week that the 2030 World Cup will be hosted across six different countries and three different continents). Or maybe this presents an opportunity for those who are facing substantial monthly payments to reduce the burden by renting their home to one of the thousands of fans attending the tournament? Regardless of your allegiances, and while nobody likes a tie, maybe there will be more than one winner here - on and off the pitch.
Portfolio News
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Mortgage Madness
Where are European mortgage holders most exposed to higher rates? - Across Europe, borrowers looking to secure new mortgages or refinance existing ones have found their payments soaring on the back of sharp rises in central banks’ interest rates. For those already on the housing ladder, there are vast differences in levels of protection against higher rates. Much depends not only on variations in rate-setters’ levels of aggressiveness but also on divergences within national mortgage markets. Read more
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The IMF proposed a country-by-country risk assessment strategy for digital assets - The International Monetary Fund has a working paper out on a "Crypto Risk Assessment Matrix," aimed at helping countries strengthen their policy frameworks. The IMF recommends a country-by-country assessment of how much it should be monitored. Read more
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Select Financings
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