The mortgage stress test faces its first big challenge in this year of soaring interest rates.
The regulators behind the stress test generated massive pushback from the housing-industrial complex, but they were dead right to worry about the impact on homeowners of rising rates.
Unfortunately, the stress test offers false comfort to individual homeowners. It may help protect the financial system by preventing a rash of defaults, but it offers no assurance people can comfortably manage a big increase in mortgage payments.
We are now in a period of mental adjustments on home ownership, starting with the idea that a big mortgage is a noble burden because you own an asset that rapidly gains value. Facing a combination of higher living costs and rising debt payments, home-owning young families are the demographic with the most money stress today. Falling home prices means there’s no moral…
