Cost of Indebtedness has never been cheaper!

gerhard dengler

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With the onset of zero interest rates (ZIRP) and negative interest rates (NIRP), the cost of indebtedness has never been cheaper.

Before if one was borrowing money (credit), one would expect to be charged interest - interest being the cost for the time and risk that the party issuing the loan would charge the borrower.

Before Ireland joined the Euro, interest rates in Ireland in modern times (1980-1999) were at least 4% and anywhere up to 18% at certain times.


Since joining the Euro starting in 1999 and reaching full harmonisation by 2002, interest rates in Ireland have been far less volatile than 1980-1999 and absolute interest rates have been much much lower.

In the last 12-24 months, the European Central Bank has sought to keep interest rates close to or at zero %.
So right now it's never been cheaper to borrow money, if you can do.

The short term prognosis is that interest rates internationally will remain low (NIRP/ZIRP) until at least 2020.

Latest Bank Rate predictions: stuck below 0.5pc until 2021

However levels of indebtedness are increasing for sovereign nation/states, companies and for individuals, in the meantime.

The danger is that when interest rates do rise - as they must at some point - that because of existing indebtedness levels even a small interest rate increase, may make indebtedness unsustainable.
 


im axeled

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i am still not going to change the habit of a lifetime, if i cannot pay with my own cash i will never buy
 

Ellen Ripley

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Feb 5, 2014
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Let the good times roll! That extension, holiday of a lifetime, and 171 reg. is becoming more of a possibility every day...

I hear that in parts of Cork city new house prices are reaching the 400k mark again.
Don't know how many will be ftb or buy-to-lets, but the housing shortage is leading to a return of the camping-overnight-to-get-your-name-down-for-the-first-phase phenomenon.
 

Eire1976

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Nov 20, 2010
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Let the good times roll! That extension, holiday of a lifetime, and 171 reg. is becoming more of a possibility every day...

I hear that in parts of Cork city new house prices are reaching the 400k mark again.
Don't know how many will be ftb or buy-to-lets, but the housing shortage is leading to a return of the camping-overnight-to-get-your-name-down-for-the-first-phase phenomenon.
Run up the bills and enjoy it for a few years and then declare bankruptcy :D
 

hiding behind a poster

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Mar 8, 2005
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If you can't afford it, don't buy it
Define "afford it". Saving for a house for 30 years rather than having a mortgage, while at the same time having nowhere to live, doesn't make much sense.
 

VHF

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It's the unsecured credit bubble I'd be concerned about.
 

roc_

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Money is only ever a means. Especially in out times, money is primarily a means of social control. What matters is that we all work hard and productively. Once that is acheived, everything else falls into place.

Irish people are now more like the Germans. That is why we can now borrow at the same kind of rates they used to enjoy alone. Back in the day of high interest rates for the Irish, we well deserved those kind of rates, taking the big picture view.

And no, rates don't HAVE to increase at some point. The science is much improved. The peoples' habits and attitudes are much improved.

Lending out money grows the economy. That is what it is for. As long as the borrower behaves well and is well informed, for the most part. That's the end of it.
 
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