Mortgage rates are soaring, but strong credit means a crisis of default like the 2008 crash is unlikely, Goldman Sachs said.

Investment bank economists said in a note on 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 the memo, which focused on the United States and other major English-speaking countries.

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 fellis also unlikely to lead to a strategic default, a situation 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.

Leave a Comment