# Why would an interest increase of 3% jeopardize so many real estate loans?
**URL:** https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080
**Category:** Real Estate
**Created:** [September 20, 2021, 7:38am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080 "2021-09-20T07:38:12Z")
**Posts on this page:** 20
**Page:** 5
### Author:  [@user137](https://forum.mustachianpost.com/u/user137)
#### Post date: [November 14, 2021, 9:47am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/86 "2021-11-14T09:47:39Z")
indeed a perfect storm comes in Central-Europe.
- people are leveraged and mortgaged to their ears on near-zero interests, which is due to change next interest cycle → people will start going bankrupt, the rocket-like property prices in the region will need to fall eventually (where people will need to refinance for a worse mortgage on a property that is worth much less)
- local currencies can’t be weakened for the energy prices, can’t be strengthened as then wages and export value would drop
- setting an artificial ceiling on utility costs (e.g. Hungary) is not sustainable and will break and exile market participants who have been somewhat-effectively running the energy business so far (instead of the government companies who are traditionally useless in running market-based operations)
They’re trapped in the current and other than following the hikes, can’t really do anything (maybe doing less cleptocracy and more transparency in politics would be something?).
PL 1.25% (up from 0.1%)
HU 1.8% (up from 0.9%)
CZ 2.75% (up from 0.3%)
If people and businesses go bankrupt in E-EU, businesses will suffer in W-Eu for all the near-shored manufacturing, IT and callcentering business there.
I’m waiting for our naturalization (and buying property afterwards). It’s going to be interesting to see the wave crash into CH (if it does).
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### Author:  [@user137](https://forum.mustachianpost.com/u/user137)
#### Post date: [November 16, 2021, 1:32pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/87 "2021-11-16T13:32:51Z")
Hungary update:
- inflation 6.5% (in October), forecast to 7% in November
- base interest rate hiked by 0.3% to 2.1%
CHF-HUF still at all time high.
your turn, Poland. 😛
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### Author:  [@ChickenFat](https://forum.mustachianpost.com/u/ChickenFat)
#### Post date: [December 4, 2021, 9:18pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/88 "2021-12-04T21:18:50Z")
A piece of opinion in today’s NZZ about the subject (only in german)
> **[Raiffeisen gegen SNB: Immobilienblase, Tragbarkeit, Kapitalpuffer](https://www.nzz.ch/meinung/raiffeisen-gegen-snb-immobilienblase-tragbarkeit-kapitalpuffer-ld.1658519)**
>
> Es stimmt: Bei den extrem hohen Preisen können sich immer weniger Menschen ein Eigenheim leisten. Aber Wohneigentum ist kein Menschenrecht – sondern für viele ein grosses Klumpenrisiko. Jetzt ist nicht die Zeit, um Vorgaben zu lockern, im Gegenteil.
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### Author:  [@kane](https://forum.mustachianpost.com/u/kane)
#### Post date: [December 7, 2021, 1:03pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/89 "2021-12-07T13:03:23Z")
Interesting, NZZ effectively takes the stance that banks should be even more restrictive with giving out mortages, due to the fact that RE will make up a large percentage of the lenders net worth’s, therefore leading to risk concentration.
I personally believe that the middle class who aspire to own RE are pretty f\*cked. It only works if you are a double income couple, and/or you have inheritance money at your disposal AND you actually find a property which is on sale (which in itself is no easy feat). If you manage to do all that, you _might_ be significantly better off than renters (see rent vs. buy discussions).
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### Author:  [@user137](https://forum.mustachianpost.com/u/user137)
#### Post date: [December 8, 2021, 10:45pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/90 "2021-12-08T22:45:03Z")
> [@kane](#):
>
> If you manage to do all that, you _might_ be significantly better off than renters … **for a while**.
I just fixed it for you 😉
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### Author:  [@baldur](https://forum.mustachianpost.com/u/baldur)
#### Post date: [December 9, 2021, 9:28am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/91 "2021-12-09T09:28:46Z")
If you fixed your mortgage for a long time (eg. 10+ years), that while may…take a while 😉
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### Author:  [@Barto](https://forum.mustachianpost.com/u/Barto)
#### Post date: [December 9, 2021, 11:56am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/92 "2021-12-09T11:56:15Z")
> [@kane](#):
>
> I personally believe that the middle class who aspire to own RE are pretty f\*cked.
Not sure if they are f\*cked, but those that choose to do it vs. other investment options seem likely to have less wealth in the future
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### Author:  [@kane](https://forum.mustachianpost.com/u/kane)
#### Post date: [December 9, 2021, 12:03pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/93 "2021-12-09T12:03:07Z")
I don’t want to argue about the rent vs. buy discussion and potential financial impact it may have, but the fact is that still a lot of people want to own RE for its intangible benefits, myself included.
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### Author:  [@Barto](https://forum.mustachianpost.com/u/Barto)
#### Post date: [December 9, 2021, 12:56pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/94 "2021-12-09T12:56:35Z")
Agree. There is balance between investing for the future vs. spending some of the money saved and enjoying it now
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### Author:  [@Grog](https://forum.mustachianpost.com/u/Grog)
#### Post date: [December 11, 2021, 9:34am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/95 "2021-12-11T09:34:44Z")
while I don’t disagree that there is a strong emotional impact (“owning where you live”), owning an home is much more probable to lead to increase stress, not joy. Was a statistic in one of the video above.
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### Author:  [@user137](https://forum.mustachianpost.com/u/user137)
#### Post date: [December 12, 2021, 9:58am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/96 "2021-12-12T09:58:22Z")
> [@Barto](#):
>
> Agree. There is balance between investing for the future vs. spending **a truckload of money as downpayment to a mortgage you will hardly ever be able to repay fully** and enjoying it now.
I fixed it for you - from a perspective of the middle class 😉
Average family income in CH - about 85k
Average 4.5 flat in Kt ZH - 1.2M
- savings for the downpayment: 10 yrs savings rate (assuming ~25k pa out of 85k saved yearly by living frugally)
- mortgaged forever (~40 years to repay capital without interest)
If you earn 3 times as much, it’s still not getting fundamentally different.
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### Author:  [@Guillaume\_GVA](https://forum.mustachianpost.com/u/Guillaume_GVA)
#### Post date: [December 12, 2021, 10:56am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/97 "2021-12-12T10:56:51Z")
> [@user137](#):
>
> If you earn 3 times as much, it’s still not getting fundamentally different.
It is. In Switzerland, real estate price increases faster than the salaries. The middle class cant afford to buy a property anymore (Swiss median salary in 2018 was [CHF 6’500 gross](https://www.bfs.admin.ch/bfs/en/home/statistics/work-income/wages-income-employment-labour-costs.html)). Moving away from cities is a short term solution. Prices will go up too.
Each year, you need more savings for the down payment and a higher salary to respect the affordability criteria.
With your example, no bank will borrow money to our couple, unless they increase their down payment to a crazy amount they couldn’t afford without a donation/inheritance.
They would need an annual income of 210 KCHF (while the median is 6’500x2x12=157 KCHF) to respect the affordability criteria.
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### Author:  [@dbu](https://forum.mustachianpost.com/u/dbu)
#### Post date: [December 12, 2021, 11:35am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/98 "2021-12-12T11:35:28Z")
> [@Guillaume\_GVA](#):
>
> real estate price _increases_ faster than the salaries
\*have increased in recent past
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### Author:  [@Guillaume\_GVA](https://forum.mustachianpost.com/u/Guillaume_GVA)
#### Post date: [December 12, 2021, 1:36pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/99 "2021-12-12T13:36:19Z")
> [@dbu](#):
>
> in recent past
If by recent past, you mean the last 20 years, I agree.
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### Author:  [@user137](https://forum.mustachianpost.com/u/user137)
#### Post date: [December 12, 2021, 6:52pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/100 "2021-12-12T18:52:25Z")
> [@Guillaume\_GVA](#):
>
> They would need an annual income of 210 KCHF (while the median is 6’500x2x12=157 KCHF) to respect the affordability criteria.
sorry, the average 85k I mentioned was about taxable income with 2 kids, their actual income will be the 150k you mentioned.
but again, if both of them would make 120k (together 240k, taxable about 160k with 2 kids), it doesn’t really make a difference. Maybe, just maybe, they can afford to buy something new, but that also means cashing out probably everything else they have gathered/accumulated so far and going in with all their capital into a single property. That’s a recipe for disaster.
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### Author:  [@Cortana](https://forum.mustachianpost.com/u/Cortana)
#### Post date: [January 11, 2022, 9:18am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/101 "2022-01-11T09:18:56Z")
I think it’s happening now. 10 year SNB bills at 0.066% already.
2%+ mortgages in 2023.
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### Author:  [@Wolverine](https://forum.mustachianpost.com/u/Wolverine)
#### Post date: [January 11, 2022, 9:38am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/102 "2022-01-11T09:38:45Z")
> [@Cortana](#):
>
> 10 year SNB bills at 0.066% already.
Thanks for the information. I went on the [SNB’s website](https://www.snb.ch/en/iabout/stat/statrep/id/current_interest_exchange_rates#t2) and couldn’t find yield data going further than 2021.
Do you know of any way to look what the yield on 10 year bonds from the Confederacy were in 2018? The price of bonds was lower, any chance the yields would also have been positive then?
Edit: Nevermind, I’ve found it (yields at issuance, so not encompassing the secondary market but that’s close enough for me). Yields were slightly positive during most of 2018: [https://data.snb.ch/en/topics/ziredev#!/chart/rendeidglfzch](https://data.snb.ch/en/topics/ziredev#!/chart/rendeidglfzch)
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### Author:  [@nabalzbhf](https://forum.mustachianpost.com/u/nabalzbhf)
#### Post date: [January 11, 2022, 10:54am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/103 "2022-01-11T10:54:11Z")
[Swiss National Bank (SNB) - Current interest rates and exchange rates](https://www.snb.ch/en/iabout/stat/statrep/id/current_interest_exchange_rates#t2) has the 10y spot rate.
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### Author:  [@user137](https://forum.mustachianpost.com/u/user137)
#### Post date: [January 12, 2022, 7:58am UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/104 "2022-01-12T07:58:52Z")
Central-Europe checking back again:
- Hungary 2.4% (2-week swap at 4.4%)
- Poland 2.25% (previous: 1.75%)
- Czech 3.75% (previous 2.75%)
exciting times.
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### Author:  [@Sugus](https://forum.mustachianpost.com/u/Sugus)
#### Post date: [January 18, 2022, 8:48pm UTC](https://forum.mustachianpost.com/t/why-would-an-interest-increase-of-3-jeopardize-so-many-real-estate-loans/7080/105 "2022-01-18T20:48:18Z")
What do you think would be the best strategy if you had to conclude a loan in the next days/weeks (my case) ?
I know that Saron gave the best outcomes during the past years and was thinking to go for that solution or for a short term fix rate but with the current incertainties would it make sense to fix the rate for the next 5-10 years (or more)? I’d love to hear your thoughts on this.
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