The most central banks in the world raised interest rates significantly the past two years to deal with inflation, but the recession that many thought would happen, because of this, did not happen. With the exception of China and Japan, which did not face an inflation problem, the major economies saw the cost of money move at or near historic highs.

In reality, however, the world economy is growing at a rate of just over 3%according to the latest forecasts from the International Monetary Fund, mainly thanks to strong activity in the US, and in many emerging economies.

An economic slowdown occurred in only a few countries or regions, including the European Union, which narrowly escaped recession.

Of course, economies are affected by many factors and interest rates are only one of them. For example, one factor common to most of the economies that created “antibodies” was that labor markets remained tight, with employment growing and unemployment hovering near historic lows. As businesses struggled to find workers after the pandemic, amid the sectoral mobility that developed, they generally avoided making layoffs.

The huge fiscal support packages in the US during the pandemic, which allowed consumption to continue after they ended, but also increased productivity thanks to, among other things, the wider application of artificial intelligence by businesses, were two more factors that continue to support the country’s development. With GDP growing at a rate of more than 2%, the US economy has defied all scenarios for a bumpy landing and will likely force the Fed to delay the timing of rate cuts as strong activity pushed inflation higher in the final quarter, climbing to 3.5% in March.

And in the Eurozone, however, there are special factors that maintain a dynamic in the economies of the South – Greece, Spain and Portugal – such as the boom in tourism after the pandemic and the increase in investment with the help of the Recovery Fund. On the other hand, the German and French economies are experiencing recession or stagnation, while overall the European economy was particularly burdened by the energy crisis and inflation caused by the Russian invasion of Ukraine.

In an analysis included in the IMF’s new World Economic Outlook report, the Fund cites differences in mortgage and housing market characteristics as another factor that partly explains the different impact on economies from high interest rates.

As the IMF analysis shows, the characteristics of mortgages and the housing market differ significantly between countries and therefore have different consequences for their economies. For example, the percentage of fixed-rate mortgages ranges from zero in the case of South Africa to over 95% in Mexico and the US.

The rise in interest rates clearly has a greater impact on the activity of countries with a high proportion of floating rate loans. This is obvious, because households with such loans will see a significant increase in their monthly payment when the central bank’s reference rate rises, unlike households with fixed-rate loans.

The impact of high interest rates it is also stronger, according to the IMF, when mortgages are high relative to property values ​​and when household debt as a percentage of GDP is high.

In terms of housing market characteristics, the impact of high interest rates on the economy is greater when the supply of real estate is more limited. An increase in the cost of money reduces the demand for new loans, but if supply is limited, the impact on property prices will also be limited.