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Mortgage lending and interest rates

Mortgage lending and housing construction have slowed considerably in many countries, the OECD said in a report on the outlook for the global economy.

Globally, financial conditions have tightened as central banks have responded increasingly forcefully to above-target inflation by pushing up market measures of real interest rates.

What has happened? Equity markets in much of the world have fallen sharply this year, nominal bond yields have risen, the US dollar has appreciated significantly and risk appetite has declined.

Note: The grey bars represent the range of highest and lowest rates of unemployment between 2002 and 2022Q2 across countries.Source: OECD Labour Market Statistics; and OECD calculations.

Meanwhile, corporate bond spreads have widened, especially in Europe, and capital outflows from emerging market economies have intensified.

While all this is occurring, the OECD added that in the United States, the spread between ten-year and two-year government bond yields has turned negative, a phenomenon that in the past often accompanied cyclical downturns; yield curves have steepened similarly in some other advanced economies, especially the United Kingdom.

Mortgage lending

Rising interest rates are also affecting momentum in housing markets.

Home sales, mortgage lending and construction have slowed considerably in many countries, and in some countries prices are falling month on month.

Labor market conditions are difficult almost everywhere. In many OECD economies, unemployment rates are at their lowest levels in 20 years, while the ratio of job seekers to vacancies remains historically low.

However, the OECD said that the pace of job growth in North America and Europe has slowed, vacancies have begun to decline in some countries, and the decline in the unemployment rate appears to have bottomed out or even reversed in some countries.

 

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