The Pandemic Mortgage Boom

Why did the mortgage market prosper in 2020 and 2021 during a period of extreme economic uncertainty? We find that record-low interest rates, a relatively rapid economic recovery, and surging home prices all contributed in important ways to the lending boom. Underlying these outcomes, government policy actions, including expansionary monetary and fiscal policy and policies to stabilize mortgage intermediaries, played a significant role in supporting the mortgage and housing markets. However, there were limits to this boom, and not everyone benefitted from it equally. The experience of the pandemic highlights the potential benefits of alternative mortgage designs that allow rates on existing mortgages to fall automatically with market interest rates, particularly during periods of stress