Chart: Why homeowners weren't crushed by the Fed's rate-hiking campaign
Most mortgage holders aren't feeling the pain of higher interest rates.
Why it matters: It's one reason the U.S. economy has so far proved resilient in the face of the Fed's aggressive rate-hiking campaign.
State of play: More than 60% of existing mortgage holders are sitting on rates below 4%, per a BlackKnight report out Monday.
- Mortgage interest payments as a percentage of disposable income have remained relatively flat even as mortgage rates have soared, the St. Louis Fed noted in a recent blog post.
- That's left homeowners in the U.S. fairly insulated from rate shock. Unless, of course, they need to sell their house.
Meanwhile, the 30-year mortgage is a uniquely American thing. In other countries, loans are shorter and homeowners are forced to frequently reprice at current market terms.
- Most mortgages in the U.K. reprice every two years, so interest rates have a direct effect on discretionary income.
- U.K. homeowners will be spending as much as 30% of their income on mortgage payments, up from about 20% previously, according to an estimate from Barclays CEO C.S. Venkatakrishnan.
The bottom line: Those golden handcuffs that are keeping homeowners from moving are likely buoying the U.S. economy.