Peter Schiff warns of $3 trillion risk in U.S. mortgage market

Economist Peter Schiff has issued a warning regarding significant risks in the United States mortgage market driven by high interest rates. Schiff suggests that the decline in the market value of long-term, fixed-rate loans issued during periods of low interest could lead to losses far exceeding those seen during the 2008 financial crisis.

According to Schiff's analysis, there is approximately $8.3 trillion in fixed-rate mortgage debt in the U.S. with an average interest rate of 4.6% and 25 years remaining on the terms. With current interest rates around 7.5%, he estimates the market value of this debt pool has already decreased by $2 trillion. If interest rates rise to the 8.5% range, he predicts the loss in market value could reach $3 trillion.

Schiff noted that during the global financial crisis between 2007 and 2010, the total realized losses from mortgage defaults were approximately $450 billion. He argues that the current potential decline in market valuation is already significantly larger than those historical losses, even before borrowers face actual repayment difficulties.