If the yield on the bonds used to finance adjustable-rate loans rises, homeowners must foot the bill – even if the increase is extraordinarily high, perhaps in connection with a currency crisis. It is very important that homeowners are aware of this risk and have taken it into account in their budgets.
I have the impression that most households will be resilient to the rise in interest rates resulting from ordinary cyclical developments. What concerns me most about adjustable-rate loans is their inherent refinancing risk. Mortgage banks offer 30-year loans financed via short-term bonds – often with annual refinancing.