Saturday, July 16, 2011
"unsecured borrowing, while available, is not cheap. Assuming the first time buyer borrowed the 20 per cent deposit, even at todayâ€™s low interest rates, the combined cost of the mortgage and repayment of the unsecured borrowing would lead to monthly repayments that are 20.2 per cent of monthly pre-tax income. If interest rates were to rise by, say, 2 percentage points, the cost would rise to 28.1 per cent of pay." Aside from the desperation of resorting to unsecured borrowing to put down a deposit, the suggestion that a mere 2% interest rate rise could push up repayments costs by 39% says a lot about how much borrowers are relying on ZIRP.