Wednesday, August 06, 2008

Interest rates creeping up

A quick review of the latest interest rate fixings on my mortgages shows that the cost of debt financing has crept up off the low points set in the second quarter. The increases are not large and even the highest rate is still well below both the net yield on the underlying properties and the rate of inflation. In other words, debt finance is still cheap.

The interest rates I am currently paying range from a low of 2.1286% to a high of 3.0014%.

As an aside, given that deposit rates have not moved (still close to zero), this effectively represents margin expansion for the lending banks. New loans are currently available on less favourable terms than some of the more recent loans I have taken out, which will also help the banks' profitability.

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