- Mortgage rates are rising and house prices are falling, but Goldman Sachs doesn’t see another default crisis.
- The bank points to new credit regulations stemming from the 2008 housing crash, which will likely protect the market from a wave of defaults.
- “Our analysis suggests that delinquency rates are unlikely to spike over the next year.”
Mortgage rates have skyrocketed and house prices have fallen this year, but I don’t think we’ll see another default crisis like this one. 2008 housing crashaccording to Goldman Sachs.
Investment bank economists said in a note Tuesday, referring to regulation, that “strong credit quality is the most important reason for not anticipating a mortgage default crisis, aimed at preventing riskier subprime loans.” is.
New rules such as minimum credit scores required for mortgages and loan-level restrictions are likely to protect the housing market, said a memo that focused on the United States and other major English-speaking countries.
It was a volatile year for the housing market, US Mortgage Rates Soar Above 7% and experts Sound the alarm for potential housing conflictsAggressive interest rate hikes are the main cause as the Federal Reserve (Fed) and other central banks scramble to keep inflation under control.
Already, US mortgage rates have risen nearly 400 basis points this year. However, Goldman noted that most mortgages in the U.S. are priced at fixed rates rather than floating rates, so the surge is unlikely to lead to defaults.
The US housing market is also less exposed to interest rate shocks than countries such as the UK, Canada and Australia, where floating rates are more common.
There are also concerns that a Federal Reserve rate hike is possible boost the unemployment ratethat would lead to more mortgage defaults, but those risks are also “fairly small” compared to other countries, Goldman said. A modest 10 basis point increase in mortgage delinquencies is below levels estimated in Australia and Canada.
and meanwhile house prices felland are also unlikely to lead to strategic defaults, situations in which borrowers abandon mortgage payments because their properties have fallen in value. of defaults were found to be strategic.
“Our analysis suggests a sharp rise in delinquency rates over the next year is unlikely,” the bank said.