Insane or not?
Robert Holzmann, the president of the Austrian national bank, and member of the European Central Bank, talked today about the interest rate policy. It was quite astonishing, I must say.
He says that 4 more rate hikes of 0.50 basispoints is necessary to battle the inflation that is torturing Europe. That means that interest rates for home loans would go above 5 % and near 6 and 7 % for some people. And that will have serious consequences for a few markets.
Is it a blunt move? Or is it an insane move? I don't know, but I do think that it is too high. Around 4 % is more than enough to calm the inflation down, in my opinion.
Housing prices will crash
Housing price will crash all over Europe, with 25 % or more, because taking a loan for a house will be at least 25 % more expensive, because of the interest rates. This could lead to another credit crunch, like we had in 2008 in the United States. It is unlikely that it will be that bad, but it be ugly, very ugly. Especially because people in the European Union see owning a house as their retirement plan. For some this could become more of a nightmare instead of a dream.
And there is the bond market, it has already taken some hits the last year, this would completely take down some of the hedge funds that contain lots of bonds.
The future will tell, but it could become quite interesting, that is for sure!
Sincerely,
Pele23