Housing Loans Are Still So Cheap

You would think that the cost of borrowing for you home has gone through the roof judging what the banks and central banks are saying. Inflation in the EU and in the USA is hitting 8% and will probably reach 10% in the coming weeks as the cost of transport fuel may temporarily reach €3 a litre!

But borrowing for you home is generally fixed at 12 month Euribor which has hardly moved from zero to 0,7%. Today’s housing loans cost between 1% and 1.5% today – and that is cheap.

Banks and their media friends are urging you to buy very expensive interest rate caps – they want to exaggerate the future probable moves in interest rates. Never listen to the advice given by banks’ salesmen, their economists and their media friends. They are all on sales commissions aimed at fleecing ordinary customers for products you do not need.

The 12 month Euribor interest rate has been below zero for years, but most consumers have never been able to take advantage of zero interest rates because the banking supervisor wanted to help her friends at the banks. Thank goodness she has moved out of this position that was too close to the big banks.

The banks always charged the full margin when 12 month Euribor was below zero. That ruling was a misuse of legal authority and an insult to market behaviour so much demanded by the banks and the government! Consumers should have taken the authorities to court but that is always hard when the little man wants to fight the banks.

But thank goodness that we have highly paid politicians as central bank leaders like Olli Rehn and Mrs. Lagarde at the helm of our central banks who think they are fearlessly fighting inflation with 0.25% interest rate increases in July when inflation is already at over 8%! We are on the starting line of some sort of turndown and you can be sure that they will not increase interest rates too much. These central bank folk prefer having fine dinners with kings and queens in Holland and in luxury ski resorts like Davos, rather than mixing with ordinary folk who somehow have to economise as their fixed wages, pensions and salaries fall in value as inflation rages.

Interest rates have never been lower since the second world war – you have never been better served if you have a housing loan this last 70 years! Don’t worry about increased borrowing costs because it is unlikely that they will reach the dreaded 3% p.a. in the next few years…. And 3% is also cheap money!

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