how does a falling economy cause people to default on their house mortgages, if their loan amount and income stay the same?

Question

how does a falling economy cause people to default on their house mortgages, if their loan amount and income stay the same?

In: Economics

Answer 1

As you phrased it … there isn’t. Generally, however,a “falling economy” implies incomes are failing (e.g. due to job losses). Or, possibly, an economy with high inflation might see either/both of: (a) more mortgage holders spending more on other basic necessities and not having sufficient left over for fixed mortgage payments; (b) the Fed raising interest rates, causing monthly payments for mortgages with a variable interest rate to then increase, leading to an increased default rate.