The housing market, a sensitive part of the economy to rising interest rates, is showing signs of deterioration as major central banks continue to implement rate hikes to tackle heightened inflationary pressures. In the US, mortgage rates have seen levels above 7% and the monthly mortgage payments now exceed $2,000, highest in 20 years. Along with elevated food and gasoline prices, high mortgage rates create stress for households, making the Fed’s job harder in engineering a soft landing, fueling volatility in markets. We expect rates to trend higher as core inflation remains sticky and central banks continue tightening stance until H2 2023. The housing market will continue to come under pressure as rates remain elevated for some time. Towards the end of 2023, if central banks succeed on bringing inflation down, we expect upward pressures on mortgage rates to ease.
Lale Akoner, Senior Investment Strategist, Global Economics and Investment Analysis team, BNY Mellon Investment Management
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