[alkonaut]

Yes, many homeowners have all or a large part of the mortgage at a rate adjusted several times per year. Right now these variable rates are around 2%. So a lot of people will see their interest rate expenses double if (when) rates normalize at say 4%.

I have my mortgage split between 5year fixed, 2 year fixed and the 3month rate, in order to limit my exposure to variations somewhat.

The general consensus is long fixed mortgages are a poor economic choice for those that have the economic margins to be on the variable rates, since the banks margins are so much higher.

[marvin]

Of course, most people who borrow 80+% can't _really_ afford the risk of an adjustable-rate mortgage, but they think they can because rates are always low and will never go back up ;)

[alkonaut]

Banks do stress tests at 7% interest rate which was a reasonable "high" interest rate 10 years ago, but now it seems almost unimaginably high.

So I think people (and banks) have calculated with higher rates, but there is always illness, divorce, unemployment...

Lots and lots of people would have a pretty miserable economy if interest rates go over 6% (i.e triple) - spending most of their money on mortgages.

So this creates the risk that rates will be self sustaining at a low level because even a 2% increase will reduce consumption and halt inflation pretty quickly.