Here’s some cold comfort for U.S. homebuyers staring down 6% mortgage rates: they’re not alone.

Mortgage rates have risen considerably over the past year across the globe, adding hundreds of dollars in monthly expenses for homebuyers internationally. 

Rates have risen sharply in Australia, Brazil, Canada, and the United Kingdom, according to a report from Fitch Ratings.

Though higher rates don’t directly affect many homeowners who have locked in ultra-low mortgage rates for a long fixed period, “housing markets in countries where mortgage rates are predominantly floating or fixed for short periods are particularly vulnerable,” Fitch stated.

Here’s how homeowners in Australia, Canada, the U.K., and the U.S., are doing:

Mortgage rates have risen in many property markets across the world.

Fitch Group

According to the chart above by Fitch, mortgage rates in the U.S. were at 6.8% in December 2022. Fitch expects rates to go down to 6.5% in 2023, and 5.5% in 2024.

The average rate on the 30-year fixed-rate mortgage was at 3.22% in early January 2022, but by mid-December, it had risen to 6.31%, according to data from Freddie Mac.

In the U.S., monthly mortgage costs are up $720, or 66.1% over the past year, Zillow said on Friday.

Because a large majority of mortgage holders in the U.S. pay long-term fixed rates for 30 years, many households’ monthly payments wouldn’t be affected by rising rates, Fitch said.

Nearly a quarter of Americans had clinched a mortgage rate of less or equal to 3%, according to data from the Federal Housing Finance Agency, as of the end of June. Only 7.2% of homeowners have a rate higher than 6%.

That’s not the same in other countries.

Canada’s housing market, which also went through a boom during the pandemic, is also in a slump after the Bank of Canada hiked interest rates

But unlike the U.S., Canadian homeowners are more exposed to higher rates.

In Canada, mortgages are only fixed for the first five years. After the five-year term expires, “borrowers need to take out new loans based on the principal outstanding,” Fitch said, “leaving borrowers with near-term maturities susceptible to payment shocks.”

Mortgage rates in Canada in December 2022 were at 6.5%, and are expected to rise to 7.25% next year, before falling again to 6% in 2024, Fitch said.

Similarly, in the United Kingdom, rising interest rates are stressing many homeowners, as their monthly payments are set to skyrocket.

According to Fitch, in the U.K., mortgage rates were at 6% in 2022. Rates are expected to drop to 5.5% in 2023, and down to 5% in 2024.

Much like Canada, mortgages in the U.K. generally are only fixed for two or five years. After that term expires, homeowners either refinance into a new fixed-rate loan, or pay the variable rate.

Around 4 million U.K. mortgage holders will be exposed to rate hikes over the next year, the Bank of England said in its latest Financial Stability Report this month.

Down under, the story is largely the same: In Australia, as rates move higher, borrowers with mortgages that are set to expire out of their fixed-term period are bracing for higher expenses.

Australian borrowers are mostly on floating rate mortgages, Fitch said.

Like the U.K., mortgage borrowers in Australia can lock in a fixed rate, generally between one and five years. After the fixed term ends, the loan would roll over to the variable rate, or the homeowner can “re-fix” the loan at a fixed rate once again.

In Australia, mortgage rates were at 5.2% in December 2022, and are expected to rise to 5.45% next year, before falling to 5.1% in 2024.

The Reserve Bank of Australia has hiked interest rates by 300 basis points since May. Fitch said that mortgage rates have more than doubled there since late 2021.

Due to higher mortgage rates in many of these countries cooling buyer demand, Fitch said it was expecting nominal home price growth to “decline or slow substantially in 2023” in many of these markets.

And “this will follow home price declines” in the second half of 2022, the group added, particularly in Australia, Canada, China, the U.K., and the U.S.

Elsewhere, rates were mixed, as seen in the chart above.

In Spain, rates were at 2.75% in December 2022, and are expected to rise to 3.5% in 2023, and 3.75% in 2024.

In Brazil, mortgage rates were at 11% in December 2022, and are expected to fall to 10% in 2023 and 2024.

In China, rates are expected to hold steady at 4.5% between now and 2024.

Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]


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