While the vast majority of U.S. mortgages are 30 year fixed rate, many other countries rely on either variable rate or short dated fixed rate mortgages. U.S. mortgage debt servicing ratios have thus remained around historical lows due to robust wage growth and a large existing stock of mortgages taken out at low rates. In contrast, households in many other countries are beginning to see their disposable income disappear. The dollar strengthened significantly in 2022 as the Fed moved more aggressively than other major central banks, but sold off when other countries caught up. The scenario may replay in a slightly different way as interest rate differentials widen because other central banks retreat first.
Related: Soft Landing Summer and Has the Fed Tightened Enough? Guideposts to Consider and The Case for "Higher for Longer": Prices are Disinflating, But Not Wages (Yet)