Interesting reading, and a good reminder of how different the UK and US mortgage markets are.
In the US, your 30-year fix shields existing owners, so 8% mostly bites new buyers. Across the pond in the UK we typically have two- and five-year fixes, so higher gilt yields reach almost everyone at remortgage.
Do you think the lock-in effect is starting to break down, given how many listings are now being cut?
The spread point is the key one for me. With 10-year yields already elevated, getting to 8% mostly depends on that 200 basis point mortgage spread widening back toward the 300 seen in 2023, which would say more about MBS demand than about the Fed.
The reminder to budget for today’s rate rather than tomorrow’s hoped-for refinancing is particularly useful. It raises a deeper question: if a purchase only feels affordable after an assumed rate cut, how much financial flexibility does the buyer really have? I’d also be interested in the distinction between a housing market that adjusts through lower prices and one that simply stalls as buyers and sellers wait. What would you watch to tell which adjustment is taking place?
This is exactly why housing feels so out of reach for so many people.
At a 7% mortgage rate, the article says nearly 70% of American households are already priced out of a median-priced home. If rates hit 8%, another 4.3 million households could be pushed out.
That connects directly to The 99% Perspective’s Housing Trap. We keep talking about home prices, but the monthly payment is where the reality hits. A home can drop in price and still be unaffordable if the interest rate keeps the payment too high.
And I worry about more buyers turning to adjustable-rate mortgages, hoping rates will fall later. That may lower the payment now, but it can create another problem down the road if rates stay high.
At some point, we have to ask: if a decent job and steady income are no longer enough to buy an average home, what does the American Dream even look like now?
Interesting reading, and a good reminder of how different the UK and US mortgage markets are.
In the US, your 30-year fix shields existing owners, so 8% mostly bites new buyers. Across the pond in the UK we typically have two- and five-year fixes, so higher gilt yields reach almost everyone at remortgage.
Do you think the lock-in effect is starting to break down, given how many listings are now being cut?
The spread point is the key one for me. With 10-year yields already elevated, getting to 8% mostly depends on that 200 basis point mortgage spread widening back toward the 300 seen in 2023, which would say more about MBS demand than about the Fed.
The reminder to budget for today’s rate rather than tomorrow’s hoped-for refinancing is particularly useful. It raises a deeper question: if a purchase only feels affordable after an assumed rate cut, how much financial flexibility does the buyer really have? I’d also be interested in the distinction between a housing market that adjusts through lower prices and one that simply stalls as buyers and sellers wait. What would you watch to tell which adjustment is taking place?
This is exactly why housing feels so out of reach for so many people.
At a 7% mortgage rate, the article says nearly 70% of American households are already priced out of a median-priced home. If rates hit 8%, another 4.3 million households could be pushed out.
That connects directly to The 99% Perspective’s Housing Trap. We keep talking about home prices, but the monthly payment is where the reality hits. A home can drop in price and still be unaffordable if the interest rate keeps the payment too high.
And I worry about more buyers turning to adjustable-rate mortgages, hoping rates will fall later. That may lower the payment now, but it can create another problem down the road if rates stay high.
At some point, we have to ask: if a decent job and steady income are no longer enough to buy an average home, what does the American Dream even look like now?