Debt and deflation make for a toxic mix

Economic policy The world has been on a debt binge for decades, underpinned by housing, and low interest rates is making it worse.
One of Britain's largest banks, HSBC, is offering its customers housing mortgages carrying a rate of just 0.99 per cent.
There are a few catches. The loan-to-value ratio has to be at least 40 per cent. The mortgage rate has a duration of only two years after which it will revert to the bank's standard variable rate of 3.94 per cent. The set-up fee is also a hefty £1999 ($3700).
Even so, it's quite a deal.
That rate on a maximum mortgage of £500,000 would cut the servicing cost on the old rate by more than £11,000 a year.
Meanwhile, across the Atlantic, mortgage-finance giants Fannie Mae and Freddie Mac are considering a programme that would make it easier for lenders to offer mortgages with a down payment as small as 3 per cent.
If you think you have heard the story of the finance-based, housing-led recovery that was the ideal medicine for an economy under stress, you are correct.
Read the full article: Debt and deflation make for a toxic mix (subscription required)

Next articles

Max Walsh


Max Walsh was for many years one of Australia’s top economic and political commentators, highly regarded as a journalist, author and broadcaster. Throughout his career, Max was involved in all dimensions of the media industry, which has encompassed positions with two of Australia’s largest publishing companies and television networks.

Read More