The Impact of Mortgage Interest Costs on Rental Inflation Amid Population Growth
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This note finds evidence of a positive and nonlinear relationship between mortgage interest costs (MIC) and rental inflation: the impact of MIC on rents is small when population growth is near its historical norm, but significantly stronger during periods of rapid population growth. This pattern is consistent with a nonlinear Phillips curve, where cost pressures are more likely to feed into higher prices when demand is elevated.