Wednesday, 28 October 2009

...Next the ECB rate increase?

In yesterday's article I wrote the following:

"... In fact, price will correct due to the forced exit strategy by central banks that will led them into increasing interest rates to avert twin bubbles as already observed in the stock market and housing market."

So today we have the following headline news:
Oct. 28 (Bloomberg) -- Norges Bank raised its key interest rate a quarter point from a record low and signaled steeper increases than it previously forecast over the next three years as inflation accelerates and unemployment remains low.
So should the ECB follow the same path, we will enter a zone of turbulence with regard to the housing market.The dices are thrown ...


Anonymous said...

The Euribor 12 month has had a tiny little bounce in October, but it was so small that it does seem that the market is expecting an increase soon. ie. it is around 1,25% where it almost hit 1,7% in July.

I expect the rates to rise, but have no idea as to when, but it doesn't look as if it will be in the next few months.

"Island Crow"

HousingFinland said...

It really depends in fact.

If there is a recovery and the economy is back to moderate growth...the ECB will start to review its interest rates policy. Should that recovery confirmed (Which I don't believe) then interest rates could rise as early as mid next year from 1% to 1.75% at first...and more to follow that will ensure a sharp correction in the housing market as most mortgage rate are linked to variable rates (cheapest available now).

On the other hand, if the recovery is not coming then the situation will be really bad as government will have shoot all their bullets and will have taken massive amount of debt and guaranty (one will have to pay for that) if it is not coming then you have an economical "doom" with a stock market and housing market sharp correction (which I think will happen).

So the housing market is most probably in a double "doom" configuration whatever happen...hence the danger to buy now.

So indeed the situation is very worrying in Finland whatever the media are saying (please refer to my next article also for the media thinf ;-> ...)