Rising rates globally set to hit Spain, Australia and Canada hardest


Many corners of the finance and investment world are grappling with challenges that weren’t contemplated just a few months ago and haven’t been around for decades. The most striking example is the extremely high and seemingly persistent levels of inflation in many countries around the world. This has prompted global central banks to implement a series of overnight rate hikes, and more are almost certainly on the way.

These rate hikes sent residential mortgage rates skyrocketing. Indeed, the interest rate on a 30-year fixed mortgage in the United States hit 6.3% on September 14, the first time it crossed the 6% level since 2008. 30-year fixed mortgages are rare outside the United States; this structure was put in place about 90 years ago to support the housing market after the Great Depression. Mortgages in most other countries are shorter term and a large percentage of them are variable rate loans.

Blue: 30-year fixed rate mortgages; Green: 15-year fixed rate mortgages; Orange: 5-year fixed-rate mortgages with one-year adjustable rate mechanisms thereafter. Source: Freddie Mac.

An obvious concern is that consumer spending and overall economic growth in countries where homeowners have a high percentage of variable rate mortgages could come under even more pressure as interest rates rise. The table below presents the approximate proportion of variable rate mortgages in the main western countries.

The details on the chart data come from the following:

  • (A) According to a US News & World Report article from June 2022, around 120 billion euros of the nearly 500 billion Spanish mortgage debt is fixed rate.
  • (B) According to a June 2021 Business Think article, around 45% of new Australian mortgages taken out in September 2021 were fixed rate, up from 15% in June 2019. However, these loans are typically only fixed for three years in average, after which the interest rate becomes a variable rate again.
  • (D) According to a July 2022 Better Dwelling article, approximately 32.5% of Canadian residential mortgages are variable rate. About half of variable rate loans were taken out in the last year.
  • (F) According to an article in the Financial Times from July 2022, 83.1% of existing mortgages in the UK are fixed rate, but around a third of this group are short-term agreements of 24 months or less, according to the Bank of England data.
  • (G) According to the European Central Bank (ECB), the share of variable rate mortgages in Germany is around 10%.
  • (H) According to the ECB, the share of variable rate mortgages in Italy is around 30%.
  • (I) According to the Mortgage Bankers Association, the national association representing the US mortgage finance industry.

A significant portion of home loans in Spain, Australia, Canada and the UK are variable rate loans. Consequently, consumers in these countries will face higher monthly expenses as interest rates adjust upwards. It goes without saying that the economic growth of these countries could come under pressure. Additionally, consumers in Spain and the UK are facing rising energy bills due to Russia’s decision to drastically cut natural gas shipments to Europe. These countries are turning to more expensive forms of energy like liquefied natural gas (LNG) shipments to replace natural gas.

Unlike the housing crisis in 2008-2009, the United States seems poised to escape the worst of the impact of rising mortgage rates. Only about 5% of mortgages in the United States are variable rate loans.

Information for this briefing was found via the St Louis Fed and the sources mentioned. The author has no security or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author holds no license.


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