What missed rent and mortgage payments mean for the financial system

TO MOST WORKING Americans, the first of the month brings both joy and sorrow. It is payday, but also when rent and mortgage payments—their biggest bills—are due. Businesses must shell out wages and rent from revenues earned over the past month. This April 1st is likely to have been even crueller than usual. The government’s efforts to contain the spread of covid-19 have forced retailers to close shop and led to millions of workers losing their jobs. Many households and firms will struggle to pay what they owe. If rent and mortgage payments stop, the financial system risks seizing up.

The bill is huge. Around two-thirds of America’s 120m households own their homes. Together they owed around $11trn in mortgages at the end of 2019. Their monthly payments depend on their deposits and their interest rates, but using national averages as a guide suggests that around $52bn might have been due on April 1st. Another 43m households rent. Zillow, a property firm, estimates that they paid $43bn a month to landlords in 2019.

Few firms own their offices or shops, instead renting from commercial landlords. Green Street Advisors, a property-research company, estimates that total office rent exceeds $10bn a month. Monthly retail rents are worth another $20bn, according to Marcus & Millichap, a commercial-property services and...



via The Economist: Finance and economics Business Feeds

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