Mortgage rates around these levels were commonplace in the decade before COVID, and aren’t particularly high in a historic comparison, but the pace of increases is unprecedented. Households who may have taken advantage of the record-low interest rates over 2021 will find it challenging to maintain the same level of discretionary spend when facing mortgage rates that could be more than double their previous fix. As noted above, we think they’ll manage, and that should provide a floor under how far house prices will fall. That’s a feature, not a bug, of tightening monetary policy…Bringing it all together, the housing market is cooling convincingly. History tells us that residential construction activity can contract without pushing headline GDP into negative territory.

Source: Stuff June 28, 2022 06:36 UTC