Wednesday, October 17, 2007

Low interest rate are to blame

We also find that banks which are less-well monitored and disciplined (i.e., subject to more moral hazard) not only take on more risk but they especially take it when interest rates are low. Low rates therefore imply excessive risk-taking. When rates are low not only do these banks take on more risk, but loan spreads are further reduced at these banks despite the higher ex-post realisation of credit risk.

The impact of short-term interest rates on risk-taking: hard evidence

Friday, October 5, 2007

Renting cheaper than buying in 2006

Private rents in 2006 were two-thirds the cost of a 100% mortgage on a two- or three-bedroom house, for a young household on average incomes.


Thanks to, vonric