Even if the borrower’s long term ability is sufficient only to service a debt equivalent to 75 per cent of the property’s estimated current market value, the lender should be able to make a proposal that both protects the lender’s capital and leaves the borrower in the home.
Not only the forward guidance, but also the purchase of long-term bonds – issued by sovereigns, banks or enterprises – aimed at lowering long-term rates. But long-term interest rates are not only determined by monetary policymakers. They are also a reflection of nominal growth expectations, and if potential growth is slowing, it has a depressing impact on the real rate of return.