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Comment by xbzbanna | Hacker News Reader

You're talking about these interest rates as though they can just move around - are these adjustable-rate mortgages? In the US, the standard mortgage has a fixed rate. So people with those mortgages would benefit from increased interest rates and/or inflation in the wider economy.

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Adjustable at a month's notice in Norway. You're free to refinance or change banks whenever you want. But if some crisis forces your bank to increase rates quickly (e.g. due to increased costs for the bonds that support their loan portfolio), you can bet every other bank will be forced to increase rates too.

This happened in 2008, and a disaster was averted only because the government bailed out the banks by allowing them to trade their now-bad commercial bonds for government bonds. It turned out to be a good deal for the government, because commercial bond rates came back down quickly. (No guarantee that this would have happened, just luck).

Yes, many homeowners have all or a large part of the mortgage at a rate adjusted several times per year. Right now these variable rates are around 2%. So a lot of people will see their interest rate expenses double if (when) rates normalize at say 4%.

I have my mortgage split between 5year fixed, 2 year fixed and the 3month rate, in order to limit my exposure to variations somewhat.

The general consensus is long fixed mortgages are a poor economic choice for those that have the economic margins to be on the variable rates, since the banks margins are so much higher.

Of course, most people who borrow 80+% can't _really_ afford the risk of an adjustable-rate mortgage, but they think they can because rates are always low and will never go back up ;)

Banks do stress tests at 7% interest rate which was a reasonable "high" interest rate 10 years ago, but now it seems almost unimaginably high.

So I think people (and banks) have calculated with higher rates, but there is always illness, divorce, unemployment...

Lots and lots of people would have a pretty miserable economy if interest rates go over 6% (i.e triple) - spending most of their money on mortgages.

So this creates the risk that rates will be self sustaining at a low level because even a 2% increase will reduce consumption and halt inflation pretty quickly.

Rates in Sweden are adjustable. Recipe for a future desaster and huge pressure on the Central Bank should they move up their rate...

As a French living in Sweden,this system seems sooo fucked up but everybody seems to think it's normal.

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