It is for this reason that our macroprudential oversight pays particular attention to the German real-estate market. Our first step is to identify the target: to reduce the likelihood and extent of future crisis-like developments. The earlier we can detect distress, the earlier every individual player can take countermeasures – by adjusting contractual terms appropriately or by building up risk buffers.
In the current environment, by contrast, it appears that the scope for such mortgage hedging effects to greatly amplify an increase in long-term rates is much diminished given the decline in the pace of refinancing and the associated increase in mortgage durations that have already occurred. Lastly, very large fractions of the total outstanding obligations of businesses and households are longterm, fixed-rate debt.