### Summary
Mortgage rates have reached a 21-year high, making home buying more expensive and deterring potential buyers. The increase in rates is largely due to the Fed's monetary policy, including interest rate hikes to combat inflation. Higher rates have also impacted sellers, leading to a decrease in housing supply.
### Facts
- Mortgage rates have climbed to 7.09 percent, a significant increase from the previous year's 5.13 percent.
- Higher mortgage rates have led to more expensive monthly payments for homebuyers, even if the house price remains the same.
- The Fed's interest rate hikes have indirectly affected long-term mortgage rates by making it costlier for banks to borrow money.
- The increase in rates has deterred potential buyers, with 66 percent of them waiting for rates to decrease before purchasing a home.
- Sellers have been less likely to list their homes due to the high rates, leading to a decrease in housing supply.
- It may take some time for rates to come back down, and experts predict downward pressure on rates throughout 2024.
### Summary
China's central bank will coordinate financial support to address local government debt problems and prevent systemic risk, as concerns grow over the impact of the country's property crisis on the financial system.
### Facts
- China's central bank, the People's Bank of China (PBOC), will coordinate financial support and tools to prevent and resolve local government debt risks.
- China's deepening property crisis has raised concerns of a spillover into the financial system.
- China unexpectedly lowered interest rates last week and is expected to cut prime loan rates to stimulate economic activity.
- The Politburo has emphasized its focus on preventing local government debt risks but has not announced specific plans yet.
- China may offer local governments 1 trillion yuan ($137 billion) in bond issuance quotas for refinancing.
- A coordinated rescue package could involve additional funding, debt swaps, payment extensions, and debt restructurings.
- Debt-laden municipalities pose a major risk to China's economy and financial stability.
- Fitch Ratings expects the central government to avoid outright bailouts of troubled municipalities.
- The central bank urged banks to increase lending and optimize credit policies for the property sector, small firms, technology innovation, and the manufacturing sector.
- However, consumer and company spending and borrowing remain low due to economic uncertainty.
- New bank lending in July fell to a 14-year low.
### Summary
House price inflation in Britain slowed in June, with the exception of London, as high mortgage rates deter buyers. Meanwhile, in the US, policymakers are divided over the need for more interest rate hikes, and China's central bank cut a key interest rate due to economic risks.
### Facts
- 💰 Average UK house prices increased by 1.7% in June, down from 1.8% in May, with London being the only region where property prices fell by 0.6%.
- 💸 Policymakers in the US are divided over the need for more interest rate hikes, with "some participants" concerned about the risks of raising rates too far, while "most" officials prioritize battling inflation.
- 🇨🇳 China's central bank unexpectedly cut a key interest rate, the one-year medium-term lending facility (MLF), by 15 basis points to 2.5%, and also lowered the seven-day reverse repo rate to 1.8%.
- 📉 The rate cuts in China were implemented due to a deteriorating property market, weak consumer spending, and sluggish economic data, including trade and consumer price numbers as well as record-low credit growth.
### Summary
China is expected to cut lending benchmarks, including the mortgage reference rate, to revive credit demand and support the struggling property sector.
### Facts
- 🏦 China is predicted to lower lending benchmarks at the monthly fixing, including the loan prime rate (LPR).
- 📉 All participants in a survey of 35 market watchers anticipate cuts to both the one-year LPR and the five-year LPR.
- 📊 The majority of participants expect a 15-basis-point cut to the one-year LPR, while the remaining forecast a 10 bp reduction.
- 📈 Meanwhile, 94% of respondents predict a reduction of at least 15 bp to the five-year LPR, which serves as the mortgage reference rate.
- 💰 Market expectations for further monetary easing are driven by declining credit lending and increasing deflationary pressure.
- 🏠 The central bank has promised to adjust and optimize property policies to address the deepening crisis in the property market.
- 📱 Analysts believe that the central bank may also implement reserve requirement ratio (RRR) cuts and balance sheet expansion to manage risks in key sectors.
Source: [Reuters](https://www.reuters.com/business/chinas-loan-benchmarks-face-big-cut-next-month-fixing-poll-2022-10-28/)
China's central bank has cut the main benchmark interest rate in an attempt to address falling apartment prices, weak consumer spending, and broad debt troubles, but the reduction was smaller than expected, signaling the potential ineffectiveness of traditional tools to stimulate the economy.
Foreign banks are lowering their China forecasts due to signs of distress in the property sector, with missed payments by developer Country Garden and trust company Zhongzhi Group contributing to rising concerns.
China's central bank has cut its one-year loan prime rate for the second time in three months as the economy struggles to recover from the pandemic, with challenges including a property crisis, falling exports, and weak consumer spending.
Main Topic: Mortgage interest rates and their impact on homeownership
Key Points:
1. Mortgage interest rates have climbed to the highest level since November 2000, making homeownership less affordable for potential buyers.
2. Rising bond yields, increased supply of Treasury debt, and concerns about inflation are contributing to higher mortgage rates.
3. As a result, the U.S. housing market is becoming increasingly unaffordable, with the median home sale price continuing to rise.
China's decision not to cut its five-year loan prime rate to revive the real estate sector and boost the economy is expected to have a limited impact and further weaken confidence, according to economists.
China's big five state-owned banks are expected to see a decline in revenue and narrower net interest margins as they face challenges such as low credit demand and pressure to support the economy amid a debt crisis in the property sector.
The interest rate on the most popular U.S. home loan reached its highest level since December 2000, leading to a significant drop in mortgage applications and contributing to the struggling housing market.
Chinese shares dropped as banks in the country cut interest rates less than expected, with the benchmark one-year loan prime rate being lowered by 0.1 percentage point to 3.45%.
Mortgage rates topping 7% have led to a significant drop in mortgage applications for home purchases, with last week seeing the smallest volume in 28 years. The increase in rates, driven by concerns of high inflation, has priced out many potential buyers and contributed to low housing supply and high home prices. As a result, sales of previously owned homes have declined, and homeowners are reluctant to sell their properties due to the higher rates. Some buyers are turning to adjustable-rate mortgages to manage the increased costs.
The end of low interest rates has created a divide between savers who benefit from higher rates and borrowers who face challenges with increased loan costs, affecting various sectors including housing, auto loans, and credit cards.
China's cabinet has approved guidelines for the planning and construction of affordable housing in an effort to support the struggling property sector and promote the healthy development of the market. Additionally, the central bank has announced measures to relax residential housing loan rules to boost loan applications and house purchases, while emphasizing that houses are for living in rather than speculation.
China has introduced new mortgage policies to boost its property market and stimulate economic growth by allowing more people to be classified as first-time homebuyers and receive lower mortgage rates.
Prospective home buyers can still secure a lower mortgage rate in today's market by improving their credit score, shopping around for lenders, considering an adjustable-rate mortgage, buying mortgage points, locking in a rate, and making a large down payment.
Chinese state-owned banks are expected to lower interest rates on existing mortgages, with the quantum of the cut varying for different clients and cities, in an effort to revive the property sector and boost the country's economy.
Mortgage rates have increased recently due to inflation and the Federal Reserve's interest rate hikes, but experts predict rates will remain in the 6% to 7% range for now; homebuyers should focus on improving their credit scores and comparing lenders to get the best deal.
China's economic slowdown is being caused by a property market downturn, softening demand for exports, and low household spending, which poses risks to financial stability and could lead to deflation and deeper debt problems. Economists are uncertain if the government's current measures, like interest rate cuts, will be enough to boost consumption and meet growth targets. Structural reforms and measures to increase household consumption are needed to address the imbalance in the economy.
China has lowered requirements for homebuyers in an attempt to revive its struggling property market and address the financial crisis.
China is planning to relax home-purchase restrictions and implement new measures to address the debt crisis in its property sector, which accounts for a quarter of its economy, in an effort to boost consumer demand.
The authorities in Beijing and Shanghai are implementing measures to ease mortgage lending rules in an effort to stimulate a slowing housing market, including allowing first-home buyers to enjoy preferential mortgage rates regardless of their previous credit records. This move is expected to drive home sales in the short term, but the long-term impact is uncertain due to low consumer confidence in the face of economic uncertainty.
Five major state banks in China, including ICBC and China Construction Bank, will lower interest rates on existing mortgages for first-home loans as part of support measures to aid homebuyers and stabilize the property sector.
China's measures to support the property sector are lowering monthly mortgage payments for homeowners but also reducing interest earnings on bank deposits, highlighting the challenge of promoting consumer spending in a weak economic climate.
Mortgage payments in the US have reached a record high due to high mortgage rates and increasing home prices, causing pending home sales to decline by 12% year over year and pushing some buyers to the sidelines; however, sellers can still expect fair prices due to low inventory.
China's economy is facing challenges due to its real estate crisis and high levels of mortgage debt, but the government is hesitant to provide fiscal stimulus or redistribute wealth, instead aiming to rely on lending to avoid a potential recession. Banks have cut interest rates and reserve requirements, but it is unlikely to stimulate borrowing. However, economists predict that policymakers will intensify efforts in the coming months, such as changing the definition of first-time home buyers and implementing property easing measures, to address the economic downturn.
Chinese commercial banks are concerned that the central bank's recent cut to mortgage rates will not be enough to prevent a surge in mortgage prepayments, which could squeeze bank margins.
Portugal's government has announced that banks must reduce mortgage interest rates for borrowers struggling with rising interest rates, by discounting the benchmark six-month Euribor rate by 30%.
Mortgage holders and first-time buyers receive a boost as lenders cut rates, with some fixed deals available below 5%.
Mortgage rates have increased in the past week, and while experts believe rates are unlikely to reach record lows seen during the pandemic, there is a possibility of rates decreasing before the end of the year if inflation continues to moderate. It is advised for homebuyers to focus on improving their credit scores and saving for a down payment to increase their chances of qualifying for the best rate.
Overall mortgage lending declined in 2022 due to the increase in interest rates and fees, resulting in reduced affordability, a higher percentage of borrowers paying discount points, and more denials for insufficient income; cash-out refinances saw a significant reduction while home-equity lines of credit increased.
The strain from interest rate hikes is starting to impact the real estate market, particularly in Germany and London, as well as the Chinese property sector; corporate debt defaults are increasing globally; banking stress remains a concern, especially regarding smaller banks and their exposure to commercial real estate; and the Bank of Japan's tighter monetary policy could lead to a sharp unwind of investments, potentially impacting global markets.
Rising mortgage rates are impacting home affordability, which has been declining since early 2021, causing some sellers to reduce their asking prices, but the lack of available properties remains a challenge for most buyers.
Higher interest rates are making homes less affordable for potential buyers, leading to a lack of inventory and driving up prices in the housing market.
Home buying demand drops as U.S. mortgage rates reach highest level since 2000, leading to a decline in mortgage application volume.
The World Bank has lowered its GDP growth estimate for China in 2024 due to elevated debt and weakness in the property sector, which has been hit by a downturn leading to unfinished homes and a decline in housing prices. While the impact on the overall economy may be limited, smaller regional banks and local government financing vehicles (LGFVs) are at higher risk. Policymakers have signaled a shift in their approach to the property market, and the long-term prospects of the sector may be hindered by demographic factors and a high rate of home ownership. However, experts believe that real estate will remain an important industry in the future.
China's recent package of relief measures to boost the struggling property market has not yet had a significant impact on homebuyer confidence, leading experts to suggest that more stimulus policies may be needed to revive the market. Despite the government's efforts to lower mortgage rates and reduce down payments, weak sales data and further price declines are expected.
Higher interest rates have boosted the earnings of big banks like JPMorgan Chase, Citigroup, and Wells Fargo, but an increase in loan write-offs and signs of consumer spending cutbacks indicate that customers are struggling.
China has instructed state-owned banks to restructure local government debt by offering longer-term loans at lower interest rates, as the country aims to reduce debt risks amid economic challenges caused by the property crisis and the COVID-19 pandemic.
Rising prices and climbing mortgage rates are making it increasingly difficult for homebuyers to afford a home, as they are borrowing more money at higher interest rates, resulting in weakened financial positions and reduced affordability.
