Construction costs are currently skyrocketing

Paving is like painting. The base is the crucial part. Setting the stones in the correct pattern at the end is not a problem at all. Screeding the base with a slope, without any dips, that is the difficult part. Especially if you haven't done it before.

I think we will see 3% and more in the medium term at a 60% loan-to-value ratio with a 10-year fixed term. 80-106% will rather be 3.5-4%.

Will there even still be many 100% financing options? Or even more, 110%? Meanwhile, numerous articles no longer mention 3% at the end of the year, but 4%. So it continues, with all the consequences for supply & demand...

But the power of central banks to simply set interest rates or even inflation rates is, in my view, an even more daring hypothesis after the past years. Everyone talks about it, but the data says something different.

You confuse the base interest rate with the long-term construction loan interest rate. These are more oriented towards the yield of long-term bonds. And for sure, we will see how a base interest rate can have an effect – namely when the ECB also has to bring out the hammer – interest rates up, recession & crisis come, economy gone, and the inflation spiral stopped. As has happened in the past as well.

You are confusing the key interest rate with the long-term construction interest rate. These are more oriented towards the yield of long-term bonds. And you will definitely see how a key interest rate can have an effect – namely when the ECB also has to bring out the hammer – interest rates up, recession & crisis there, economy gone, and inflation spiral stopped. As has happened in the past.

And what do the yields of long-term bonds orient themselves to? When I correlate time series, key interest rates and market rates for the standard 10-year bond are only loosely correlated to such an extent that no scientist would draw a direct connection from it.

Who really made a difference was Paul Volcker, who overnight added double-digit percentage points. Otherwise, I simply don’t find the often-claimed connection in the data – and also don’t find any papers that do. But everyone talks about it as if it were a fact.

I find that strange! Without guarantee, since I can of course be wrong.

And what do the yields of long-term bonds depend on?

Supply and demand. A buyer is currently withdrawing more and more. In addition, demand is determined by inflation expectations and economic outlook.

Is it already observable that the massive decline in steel is being passed on?

The ECB's interest rate hikes will NOT (!) be responsible for a further increase in mortgage rates.

They also have nothing to do with each other at first because we are at significantly different points on the yield curve. Central banks control the very short end through the key interest rate. This affects the long end in the sense that long-term investors want a risk premium for committing themselves long-term. Otherwise, the correlation between the key interest rate and the 10-year or even much longer maturities is rather loose.

Much more impactful here is that the ECB is stopping its bond purchases and the FED is already planning to gradually sell its bonds. So far, risk premiums in Europe were practically not enforceable; the ECB bought almost everything at almost any price. An institutional investor who, due to regulations, must invest in government bonds with corresponding credit quality had to play along. Now that is changing. The ECB is dropping out as a buyer, and across the pond there are likely to be some bargains as the FED starts selling. Even the tapering of bond purchases has led to rising yields and indirectly increased mortgage rates.