Save or Overpay? What to do with your mortgage if interest rates rise

If central banks signal a definitive end to rate hikes and commit to a stable forward path, mortgage refinancing demand would likely stabilize, reducing volatility in mortgage-backed securities and allowing housing markets to price in clearer long-term borrowing costs.

Continued uncertainty about the trajectory of interest rates would plausibly sustain elevated mortgage spreads, keep refinancing activity subdued, and leave housing demand sensitive to each incremental economic data release without a durable shift in household borrowing behavior.

A sustained or unexpected acceleration in rate hikes would put downward pressure on housing valuations and mortgage origination volumes, while increasing delinquency risk among variable-rate borrowers and potentially triggering a reassessment of credit quality in mortgage-backed asset pools.