By Alexander Kenerson and Henry Mariscal

The COVID-19 pandemic reshaped the global economy. Supply chains were dismantled, trade ground to a halt, and overall consumption plummeted, making a global recession inevitable. Faced with the urgent task of restarting their economies, governments around the world made critical policy decisions, choices that continue to shape global markets today. Housing markets, considered a cornerstone of economic stability and growth, have experienced some of the most significant impacts.

An article by the Federal Reserve Bank of Philadelphia explains how U.S. mortgage rates were affected by the COVID pandemic. This article describes how lending boosted as a result of record low interest rates starting in July 2020 that continued through 2021, with much of the lending coming from refinancing. This was unexpected coming out of the pandemic, as the immediate downturn mixed with high unemployment caused expectations of foreclosures similar to the period of the Great Recession. As a result of this hot housing market and abundance of refinancing, home prices quickly increased. In response to this, mortgage rates increased, slowing down the amount of refinancing and slowing the increase of home prices. Overall, this article illustrates how the change in the United States mortgage rate affected refinancing and home prices in the period after 2020 to an extent where the mortgage rate needed to be raised immediately. Continue reading →