In some countries, governments have already intervened to help hard-pressed consumers facing rapidly escalating repayments. In South Korea — one of the first Asia-Pacific economies to start hiking rates — policymakers recently agreed to outlay more than 400 billion won ($290 million) in funds to help reduce the share of households on variable-rate mortgages.

And in Poland, where monthly payments for some borrowers have doubled as rates rise, the government stepped in earlier this year to allow Poles to suspend payments for up to eight months. The move wiped out profits of major banks after the industry was forced to book about 13 billion zloty ($2.78 billion) in provisions.

China is dealing with an escalating property crisis tied to a wave of developer defaults and borrowers withholding payments on mortgages for unbuilt homes. In other countries, the ripples are also starting to spread.

In Sweden, formerly one of Europe’s hottest markets, home prices have fallen about 8% since the spring, with most economists now expecting a 15% drop. Rising rates also are pressuring property companies that borrowed heavily on the bond markets to finance their operations, leaving investors increasingly concerned about their ability to refinance that debt.

Price declines also are accelerating in the UK. Home values are flat or dropping in almost half of London’s boroughs, a Bloomberg analysis shows. HSBC Holdings Plc has warned the UK is on the “cusp of a housing downturn” and demand probably will plunge 20% over the following year.

About 1.8 million UK borrowers are due to refinance in the next year. Most vulnerable are the first-time buyers who bought homes as prices spiraled during a stamp duty tax holiday introduced in summer 2020 to bolster the market during the pandemic. Those who fixed for the short term face significantly higher repayments at a time when real wages are falling at a record pace and the cost of living is soaring.

While the US has less risk from resetting mortgages, the surge in borrowing costs in recent months has pushed price-squeezed buyers into more flexible loans that carry cheaper interest rates. The share of adjustable-rate mortgages in loan applications jumped in July to the highest level in 15 years, according to Zillow Group Inc. data.

Goldman Sachs Group Inc. predicts US national prices will flatten in 2023, though there are already signs of more rapid declines in certain regions. Sellers are slashing prices in pandemic boom areas that attracted remote workers and experienced some of the biggest gains in recent years, while homebuilders are contending with a glut of inventory they can’t sell.

Braced for Pain
In Australia and Canada — two of the world’s bubbliest markets — economists anticipate a notable crunch.

While requirements that most Canadian borrowers be stress tested before they get a mortgage make widespread defaults unlikely, a round of belt tightening that could be felt economy-wide looks increasingly certain. Variable-rate mortgages accounted for nearly 60% of all new home loans at the height of the country’s real estate frenzy earlier this year.