And if you then throw a slump in real estate prices into this cocktail – in other words, falling prices for the collateral securing mortgage loans – things might get expensive for the banks. Real estate loans are just one source of risk, though. Loans to enterprises are another potentially mounting risk factor.
Up until recently, firms were still benefiting from low interest rates and a strong economy. But now, with the onset of inflation, we are seeing an upturn in costs and interest rates and, what is more, an economy that is likely to slide into recession. This will probably make it more difficult for enterprises to service loans.