The global rise is long-term interest rates continues. Here in Belgium the rate of interest for money lent for a period of 10 years currently stand at 3.351%, its highest level since the spring of 2012. Higher interest rates are bad news for the housing market and for the Belgian treasury.
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Long-term interest rate at highest level in more than eleven years
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Analysts expect that central banks will further increase their base rate. Increasing interest rate is a method often used by central banks to try to combat high inflation. However, this can result in an economic slowdown with all the difficulties that that brings with it.
One analyst told the Bloomberg news agency that "Central banks still have some work to do". It is highly likely that interest rates have not peaked yet. Interest rate rises are a global phenomenon. In Germany interest rates are at their highest level in 12 years while in the UK rates are at a 15-year high.
Bad news for house hunters and for the treasury
In Belgium, the ten-year interest rate rose today to 3.351%, its highest level since April 2012. Higher interest rates make borrowing, particularly mortgages, more expensive. This is all-too apparent on the housing market. The number of new mortgage loans almost halved in the first six months of the year to its lowest level since 2007.
Rising interest rates are also bad news for the Belgian treasury if the government has to raise money on the financial markets in the future. According to the daily ‘De Standaard’, the Belgian treasury will have to spend about 1 billion euro extra in interest payments on money that it has borrowed due to rising interest rates. By 2031, the annual interest bill will rise back up to 20 billion euro/annum. All this will come on top of the ever-increasing cost of paying for the aging population.