Who doesn’t know the Dire Straits song „Money For Nothing“? Reality even caught up with us. For debts there is even money back today. In this logic, debts have become an asset and no longer a burden. This of course reverses many laws in the real economy and the financial markets. In the US, companies with new debts are buying back shares because they expect financing advantages in view of the low interest rates for corporate bonds. In Germany, you can soon get real estate loans for free.
Low interest rates are of course also a reason for rising house prices. However, the favourable interest rate environment does not mean that the road to home ownership has in principle become easier and more affordable. Rather, the challenges have changed. The hurdle that households have to overcome today when buying their own home is no longer the viable monthly burden. Since banks‘ capital requirements have increased with rising real estate prices, the equity required often limits the wishes for real estate financing.
The revenue streams have therefore changed. The financing banks can now expect a lower yield, while the owners of the property can earn a higher profit, as prices have risen. For the buyer, the lower interest rates also relieve the burden, but this is relatively small compared to the other revenue streams. The winner of the development is clearly the owner of the property.
Translated with www.DeepL.com/Translator