House prices are now falling in nine rich economies. As inflation and recession stalk the world a deepening correction is likely
Save time by listening to our audio articles as you multitaskThe cause of the crunch is soaring interest rates: in America prospective buyers have been watching, horrified, as the 30-year mortgage rate has hit 6.92%, over twice the level of a year ago and the highest since April 2002. The pandemic mini-bubble was fuelled by rate cuts, stimulus cash and a hunt for more suburban space. Now most of that is going into reverse.
Some other places, such as South Korea and the Nordic countries, have seen scarier accelerations in borrowing, with household debt of around 100% ofThey could face destabilising losses at their banks or shadow financial firms: Sweden’s central-bank boss has likened this to “sitting on top of a volcano”.
A further problem is concentrated pain borne by a minority of homeowners. By far the most exposed are those who have not locked in interest rates and face soaring mortgage bills. Relatively few are in America, where subsidised 30-year fixed-rate mortgages are the norm. But four in five Swedish loans have a fixed period of two years or less, and half of all New Zealand’s fixed-rate mortgages have been or are due for refinancing this year.
Danmark Seneste Nyt, Danmark Overskrifter
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