What is happening with interest rates?
Interest rates rise and fall, we have been in a secular-ZIRP (zero interest rate policy) environment for quite some time and as people who subscribe to the monetarist school of thought, this would always lead to inflation which we are seeing now, albeit a fairly delayed response given how long this policy has been in place.
Not too long ago the yield curve was negative 20 years into the future such was the dismal outlook of markets for any level of inflation, but then you had a pandemic, the ‘great resignation’ and between labor and supply constraints along with monetary policy effects, there is inflation you haven’t seen in 40 years. Now the curve is negative only one year into the future and the price in the money markets has risen.
Just to clarify this, many mortgage providers get their money by buying it (you buy at X + interest rate and then ‘sell’ it to borrowers at X+margin [which is ideally above the price you bought it at]). In an oversimplified manner, it’s like the way a person who runs a shop might buy a chocolate bar for €1 and sell it for €1.50. You can do that with money too.
What can you do about it?
Absolutely nothing, market prices, and inflation are driven by market forces and/or governments. What you can do is respond in a manner that is in your favour or which can help to protect you and at the moment that means for people carrying debt that you either clear the debt or fix it in place so you have an assurance that it will remain the same price for the fixed period.