In contrast to 2008/09, when the US housing market and non-performing subprime MBS formed the epicenter of the GFC, the housing market has proved more robust in 2020 so far.

Learning from 2008/09, the Fed quickly resumed MBS purchases in March 2020. These MBS purchases were designed to prevent a collapse in mortgage finance and self-feeding spiral of loan defaults, repossessions, negative equity and lower prices.

Although the spread between 10-year yields and mortgage rates has widened sharply, outright mortgage rates are at historic lows. Refinancings have also recovered quickly, despite the COVID-19 restrictions.

For prime borrowers, there is little evidence of a housing crisis, despite the surge in unemployment. Loan forbearance schemes and a foreclosure moratorium have temporarily alleviated significant distress for many borrowers.

A robust housing market in the years since 2009, and steady house price gains mean prime borrowers generally have good equity buffers at current house prices. Lower building permits in the decade since the GFC also mean the over-build of housing supply, which occurred in the run-up to the GFC, is less evident today, reducing downward pressure on house prices.