TimesNewsNow

The Atlantic Divide

The Atlantic Divide

The Atlantic Divide

The rising cost of living can look very different depending on where you live.

Economic policymakers around the world are raising interest rates to try to tame the rising cost of living. Jerome Powell, the Federal Reserve chair, reiterated his commitment to that policy in a speech yesterday. He warned against giving up on inflation “prematurely” and promised to “stay the course until the job is done.”

But both rising rates and high inflation can have very different practical effects depending on who you are and where you live. Gas prices matter much more to people who commute long distances to work, for example. Higher interest rates are costly to people who rely on credit cards to pay their bills, while they can actually be good news for retirees living off savings.

In today’s newsletter, I want to explore a striking example of those differences: the housing market on either side of the Atlantic. In Britain, rising rates are threatening to force some people out of their homes. In the United States, they are in some cases preventing people from moving.

At the beginning of this year, the typical U.S. home buyer could get a mortgage with an interest rate of just over 3 percent, low by historical standards. Today, buyers can expect to pay more than twice that in interest — more than 6.5 percent on average, the highest rate in over a decade. To put that in concrete terms, for someone buying a $300,000 home with a 20 percent down payment, that’s the difference between a monthly mortgage payment of $1,000 and a payment of more than $1,500.

If you own a home in the United States, though, chances are your monthly payment hasn’t gone up at all. That’s because a vast majority of homes in this country are bought using 30-year, fixed-rate mortgages. If you locked in a rate of 3 percent last year, your monthly payment will stay the same for the next three decades, no matter what happens with interest rates, home prices or overall inflation.

In Britain, mortgage rates have also risen rapidly. But the impact of higher rates looks very different. That’s because most mortgages there have fixed rates for only two to five years. (Others have variable rate mortgages that automatically change whenever the Bank of England raises or lowers interest rates.) As my colleague Eshe Nelson reported recently, millions of Britons expect their interest rates to jump up over the next year. Inevitably, some of them won’t be able to afford the resulting higher payments, and will be forced to leave their homes.

There’s no question that, for most U.S. homeowners, the stability that their fixed-rate mortgages provides is a huge benefit right now, effectively insulating them from both the effects of high inflation and rising mortgage rates.

But not everyone comes out ahead. In the U.S., you can’t take your mortgage with you when you move to a new home. As a result, homeowners who might have been planning to relocate over the next few years — to trade up to a bigger house, for example, or to downsize after the kids head to college — now have a strong incentive to stay put and hold on to their low interest rate.

As a result, fewer people are listing their homes for sale, which in turn is keeping home prices high even as the housing market has slowed by other measures. That means that anyone hoping to buy a first home now faces a quadruple whammy: There aren’t many homes to buy. The homes that are available are expensive. Rising interest rates are sapping buyers’ power. And if they don’t buy, then they have to keep paying rent — which is also going up.

As Roman Sustek, an economist at Queen Mary University of London, put it to me: “In the U.S., you’re going to have winners — these are the guys with existing loans — and you’re going to have losers, who are the new borrowers. In the U.K., everyone is going to be a loser.”

These complex dynamics also have implications for the broader economy. The prevalence of fixed-rate mortgages in the U.S. means that the Fed can raise rates aggressively without worrying that millions of people will lose their homes. But it also dampens the effect of those rate increases: If U.S. homeowners were to face a sudden upturn in their housing costs, they’d be likely to pull back their purchases in other areas (something that is already starting to happen in Britain). Instead, many Americans can keep on spending, which could help keep inflation higher for longer.

Haiyun Jiang/The New York Times
David Guttenfelder for The New York Times

Run from anyone who claims to know where China’s protests are headed next, Nicholas Kristof says.

Silicon Valley made big promises in Africa. It’s falling short, Ifeoma Ajunwa writes.

George Steinmetz for The New York Times

Epic journey: How cattle are exported from Australia to Indonesia.

Shannon Abloh: She is ready to talk after the death of her husband, Virgil.

Listen to “First Person”: Is this climate activist turned politician a savior or a sellout?

A Times classic: A college degree is still worth it.

Advice from Wirecutter: Guests but no guest room? Try these essentials.

Lives Lived: As a singer, songwriter and keyboardist, Christine McVie helped drive the phenomenal success of Fleetwood Mac, one of rock history’s most tumultuous and beloved bands. She died at 79. (Listen to 12 of her best songs.)

Blowout: Suns superstar Devin Booker scored 51 points in just three quarters of Phoenix’s win over the Bulls.

A new era: Rose Bowl officials agreed late last night to clear the way for a 12-team College Football Playoff in the 2024 season.

Dylan Martinez/Reuters

Relief: Led by Lionel Messi, Argentina advanced with a 2-0 victory over Poland, which also qualified for the knockout round despite the loss.

Luxury boxes: V.I.P. isn’t exclusive enough. To get the best perks at the World Cup, you have to be a V.V.I.P.

New format? FIFA is considering penalty shootouts for group-stage games in the 2026 World Cup.

Louis van Gaal: Meet the Dutch coach on a mission to stop the U.S. this weekend.

Today’s matches: Croatia, Belgium, and Morocco play for two spots in the next round, starting at 10 a.m. Eastern. Here are the standings.

In the streaming TV era, many shows can feel familiar, an endless march of sequels and prequels. The shows on The Times’s best TV of 2022 list break out of that rut. Here’s a taste of each critic’s picks:

“Reservation Dogs” (FX on Hulu): In its second season, this series became weirder, funnier and more heartbreaking, as its Indigenous teens tried to grapple with loss and hang on to hope — or, if necessary, steal it. — James Poniewozik

“Landscapers” (HBO): Working from the bizarre-but-true story of a middle-aged British couple convicted, long after the fact, of murdering the wife’s parents, the brilliant young British director Will Sharpe turned out a show unlike anything else. — Mike Hale

“Derry Girls” (Netflix): Even though “Derry Girls” tips the scales at just 19 episodes, there was a lot to the show, both in terms of its enviable joke density and its ability to metabolize entrenched international conflict alongside swoony teen goings-on. — Margaret Lyons

Sang An for The New York Times. Food Stylist; Simon Andrews.

These garlic noodles are simple — but they can be fancy, too.

Our travel guide to Rome helps you blend the ancient with the new.

In “Fit Nation,” Natalia Mehlman Petrzela charts how America became addicted to exercise.

Stephen Colbert is conflicted over a landmark Jan. 6 conviction.

The pangrams from yesterday’s Spelling Bee were additional and dilation. Here is today’s puzzle.

Here’s today’s Mini Crossword, and a clue: Take the wheel (five letters).

And here’s today’s Wordle. After, use our bot to get better.

Thanks for spending part of your morning with The Times. See you tomorrow.

P.S. The word “algorithmization” appeared for the first time in The Times recently, describing how Apple and Spotify are changing how people listen to hip-hop.

Here’s today’s front page.

“The Daily” is about the Oath Keepers trial verdict.

Matthew Cullen, Lauren Jackson, Ian Prasad Philbrick, Tom Wright-Piersanti and Ashley Wu contributed to The Morning. You can reach the team at themorning@nytimes.com.

Sign up here to get this newsletter in your inbox.

Original Source

Related Posts