Inflation and Rising Rates: A winning combination for borrowing

Mortgage rates have been at an all-time low for many months.

Inflation and Rising Rates: A winning combination for borrowing

Mortgage rates have been at an all-time low for many months. This windfall result prompted savers to rush to buy real estate on credit in order to profit from it. The investment was quick and profitable, as borrowing costs were often less than 1%. Inflation has caused central bank interest rates rise, which is causing borrowing rates to rise. Rising mortgage rates are expected to continue.

It is difficult to get a loan under these conditions. It is actually a good time to get a loan! Rates charged today are very low. They are only 0.5 to 1 point below historical lows. Borrowers will be benefited by increases in inflation and borrowing rate. In France 98% of mortgages have a fixed rate. You can fix your credit costs by borrowing at a fixed rate today. It will not change.

Rents from your real estate investments should not be changed. They are often indexed to inflation. In times of inflation, wages should rise. The result is that if your income increases but your cost remains constant, you will see a decrease in the amount of monthly loans that you pay.

You can also hope to get back a property that has seen its value increase with inflation at the end your loan. Property prices rose dramatically in the 1970s and 1980s, which were the last major periods of inflation. There was a double-digit increase in annual growth. Is this possible in the future? It is impossible to predict, but if it does, then the borrowers will be the true winners, just like their grandparents or parents thirty years ago.

Stefan de Quelen

China is in an unprecedented position. A sharp slowdown of growth. The country has been stuck since Xi Jinping's "zero Covid", policy which was implemented 28 months ago. Beijing is searching for a way out of this crisis, just a few months before the Congress that will consecrate Grand Helmsman.

The result is that global growth has slowed down. Over the last twenty years, China has been the major source of global economic growth. China was responsible for 25% of the rise in activity. According to The Economist, its economy grew by 79 percent in the 80th quarter. The machine was not working for several weeks. For example, retail sales have dropped by 11% in a single year. For the first time since 1990, Chinese growth could be lower than the United States'.

What is the explanation for this failure? There's the "zero Covid", policy and lockdown that has affected more than 200 million people in major cities. It isn't the only reason. Xi Jinping previously launched a campaign to promote more equality in prosperity. He had targeted entire sectors of the economy, including private education and video games, while reducing others. Jack Ma's Chinese Gafa, Alibaba.

Premier Li Keqiang raised the alarm. However, no concrete actions have been taken. China is not willing to participate in the same interventionist one-upmanship that the central banks and governments of Western countries did during the Covid crisis. China is waiting for the end to the confinements, and is betting on an economic rebound that is fueled by household consumption and investment.

Marc Fiorentino

This represents the number of rate increases that central banks worldwide have made in the past three months. Never seen. It's not over. We await the July decision of the European Central Bank, as well as that of Canada, Australia, and India. However, rates are still at historic low levels despite the explosion in money costs. Some countries, such as Japan, continue to resist a zero-rate policy.

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