- Mortgage fixes in the UK are short by international standards
- IMF economists warn that the higher interests are, the greater the chance that households will feel the pinch
When interest rates started rising, two things seemed like a safe bet. First, higher rates would lead to an economic slowdown and, second, they would burst the post-pandemic housing bubble.
Neither scenario has really materialised – at least not in the UK. Despite the highest base rates for 16 years, the economy is recovering from a very mild technical recession and house prices have only dipped. As the chart below shows, although some countries have seen a painful post-pandemic house price correction, the UK is not one of them. Mortgages could hold the key to understanding both economic puzzles.