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Jens Weidmann, President of the Bundesbank, has warned that the ultra-low interest rates in the Eurozone today won’t stay low for ever. A lot of Spanish banks are offering sweet financing deals today to dump their property on the market, and of course many buyers today can easily afford Euribor +1pc, or something around 2pc to 3pc. But what happens when Euribor goes up to 5pc and they are paying 6pc to 7pc? Many buyers might find their finances stretched, and I worry that many are not be looking at that possibility down the road. Fingers crossed interest rates stay low for several years to come, if for ever is not possible. In the meantime savers are getting screwed.
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A lot of people on the markets are talking about US rates rising. If that happens, expect to see rates rise in the EU and the UK. I actually feel it will hurt the UK more (and the housing market there). In the EU, and in particular Spain, Ireland etc we’ve already seen the lack of credit strangle the market and house prices plummet. The UK to an extent in the south has avoided this through QE. But when interest rates rise then those buying at the top of the market will be wiped out. The alternative to this scenario is that the pound is allowed to plummet to half its value and then the foreign buyers lose out.
I’m afraid we’ve seen nothing yet. -
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@shakeel wrote:
Pearls of commercial wisdom. Its like saying we all will die one day.
Yes, and people tend to forget that fact, so a gentle reminder can be useful 😉
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