Housing loans will get more expensive

If you have a home with a big housing loan then think carefully about what a two or three percentage point increase in the interest rate on the loan will mean for you.

Such an increase is not far away – a year or two may pass but interest rates will most certainly creep up.

Home buyers in Sweden, Australia, Canada and the UK have all seen interest rate increases and this will be followed by increases in the EuroZone and in the USA in good time.

Naturally, the US Federal Reserve and the European Central Bank have said that they see no need to increase interest rates just now, but they are really only talking about from now until Christmas 2021.

They have no intention to say anything else because they are sitting on several trillions of bonds from the member  governments, big national banks and big companies. If they even hint that they will allow an increase interest rates the result will create huge losses for the Central Banks because they have the biggest positions in bonds. A one percentage point increase in bond interest rates will result in massive losses for them, and will result in massive criticism from the Ministries of Finance and State Treasuries who must spend more to finance their huge budget deficits. Corporate borrowers will also start to complain that their willingness to invest will be reduced if the cost of money increases…

Who wants to be a central banker when you are a messenger who brings bad news to the front pages!

But as the other article here (follow this link) explains – inflation is hardly going to disappear just now and it is already far higher than interest rates. The wealthy are seeing their investments blossom. They are not trying to make do with a low wage or an inadequate pension that decreases in value as the price of food and energy rise faster than the time it took for Titanic to sink.

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