High interest rates with fixed interest, alternative flex loans?

2022-09-28 12:34:46

If there is another wage-price spiral with persistently high inflation, the FED and ECB will continue to raise interest rates, even with the knowledge that the economy will be strangled.

And what is that supposed to achieve? No investments, backlog of maintenance, no wage compensation, lower tax revenues, yet higher debt, etc.
The inflation is mainly political in nature and not really comparable to the crisis in the 1970s. Essentially only losses of prosperity.

2022-09-28 12:36:17

For me, the variable loan is therefore out due to the 2.75% margin.

In the end, it doesn’t matter what you decide on. It won’t get cheaper now or anytime soon – whether variable or with a short or long fixed interest period. If you want to gamble on falling interest rates, you have to endure the currently high rates first. Or you can come to terms with them for a long time right away and choose a longer fixed interest period.

2022-09-28 12:57:43

Yes, I agree with you. A very high inflation with a wage-price spiral is probably the lesser evil than a still high inflation with a strangled economy because interest rates are too high.

Who still remembers “Five percent inflation is easier to bear than five percent unemployment”? In the end, you had both. High inflation is poison for supply chains, and once it has taken hold, it can only be stopped by even higher key interest rates. See Volcker. The recession will definitely come – based on everything known about inflation – the only question is whether sooner or later.

2022-09-28 12:59:59

In the end, it doesn't matter what you decide. It won't get cheaper now or anytime soon - regardless of whether variable or with a short or long fixed interest rate period. If you want to gamble on falling interest rates, you first have to endure the currently high rates. Or you directly come to terms with it for a long time and choose a longer fixed interest rate period.

You mean 3.5% should be the bottom for now with a margin up to 4.5% to 5%?

I have an offer here with a 5-year fixed interest rate and 3.5% effective.

2022-09-28 13:06:31

You mean 3.5% should be the floor for now, with room up to 4.5% to 5%?

Yep. I’d also be fine with a pullback to 3.1% or so – I would still say "That’s all one level."

2022-09-28 13:12:45

I also think it will hardly get any cheaper. Further interest rate hikes will come. The risk-reward ratio is insanely bad. Have them offer you 10 years again, that should be just as expensive as 5 years. Better 15 years, you can terminate early after 10 years if interest rates go down.

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High interest rates with fixed interest, alternative flex loans?

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