LA DINÁMICA CAMBIANTE DE LOS TIPOS DE INTERÉS

Stuart Thorn, Junio 2025

En las principales economías, los gobiernos se han permitido el lujo de fijar los tipos de interés.

El mecanismo para ello consiste en que el Gobierno fija el tipo que pagará por los depósitos a largo plazo de los bancos minoristas y por los depósitos a un día de los bancos, estructurados como acuerdos de recompra inversa. Esto establece un tipo de interés difícil de bajar.

El gasto público deficitario, es decir, gastar más de lo que se recauda en impuestos, requiere un endeudamiento continuo y una carga de deuda cada vez mayor. Los prestamistas buscan la mejor rentabilidad más una prima de riesgo. Para que esto funcione, debe existir cierto equilibrio. Si no se satisface el apetito de los prestamistas por la deuda, tenderán a reducir los costes de los préstamos. Pero, si los prestamistas desean más deuda, pueden aumentar los costes de los préstamos. Las condiciones asociadas a la deuda también cambiarán a favor de una u otra parte como parte de la combinación de costes.

El 9 de mayo, Jamie Diamon, Presidente y director ejecutivo de JPMorgan Chase, predijo una crisis en el mercado de bonos. Sin embargo, esto ya se había observado tras la caída de los precios de los bonos el 9 de abril y la posterior suspensión de la mayoría de las medidas arancelarias por parte del presidente Trump. La paradoja que podría surgir en las economías con déficit fiscal es la presión para reducir los tipos de interés y así estimular la salida de la recesión, y la exigencia de los prestamistas de costes de financiación cada vez mayores para seguir financiando el gasto deficitario.

La solución es eliminar el gasto deficitario y devolver al gobierno el control de los tipos de interés. Una reducción tan drástica del gasto público podría tener consecuencias negativas imprevistas. El compromiso podría ser una reducción gradual, pero claramente visible, del gasto deficitario.

THE CHANGING DYNAMIC OF INTEREST RATES

June 2025

In major economies government has had the luxury of setting interest rates. 

The mechanism for this is the Government sets a rate that it will pay on long term deposits from retail banks and on overnight deposits from banks, structured as reverse repurchase agreements. This sets a rate it is difficult to go below.

Government deficit spending, spending more than is collected in taxes,  requires continued borrowing and an ever-growing burden of debt.  Lenders are looking for the best return plus a risk premium. For this to function there has to be some equilibrium. If lenders appetite for debt is not satisfied, it will tend to reduce borrowing costs. But, if there is more debt that lenders want, they can push up borrowing costs. The terms associated with the debt will also shift in favor of one side or another as part of the ‘cost’ mix.

On 9^th May Jamie Diamon, Chairman and Chief Executive Officer of JPMorgan Chase,  predicted a crack in the bond market. But this had already been seen after the 9^th April bond prices dropped and President Trump’s subsequent suspension of most tariff measures. The catch 22 situation that could come upon deficit spending economies is a pressure to reduce rates to stimulate an economy out of a recession, and lenders demanding ever increasing borrowing costs to continue to fund deficit spending. 

The solution is to eliminate deficit spending and return control of interest rates to the government.  Such a dramatic reduction in government spending may itself have unintended negative consequences.  The compromise could be a gradual, but clearly visible, reduction in deficit spending.   

Principal considerations for the residential property market outlook in Palm Beach and Broward Counties, Florida - Stuart Thorn, eXp Realty, Boca Raton, Florida November 2021

I see a multitude of predictions, but predictions are just predictions. The two truisms about predictions I favor are, i) given enough time all predictions come true, and ii) when everyone finally agrees on the same near-term prediction, it is often wrong. To gain an insight I prefer to look at the levers that influence a market.

SUPPLY - the housing stock in Palm beach and Broward counties is aging and new development is limited by the Atlantic to the east and the protected wet lands to the west. There is new development to the north but if you want easy access to Fort Lauderdale then a nice new home in Fort Pierce is of limited value. Additionally, the demand for construction industry tradesmen and the materials supply issues, have disrupted the construction industry. According to HBW Note 9, Q3 2021, new permits in 7 counties of South East Florida, totaled 10,055 but 4,605 were in St Lucie county (46%); if you cannot recall the geography that is the east coast from Port St Lucie to a little north of Ft Pierce.

DEMAND - in the year to April 2020 approximately 390,000 people moved to FloridaNote 1. Against Florida's population of 21,000,000Note 2, that sound like almost 2%. If you consider that some 200,000 Floridians give up this mortal coil each yearNote 3 and another 50,000 just leave the stateNote 4, then the that demand number goes down to 140,000. In the year to April 2021 the influx decreased to 330,000Note 1, lowest number since 2017 and less than the 2018 and 2019 pre-pandemic levels. Closed sales in September 2021 were actually down 1.3% on the previous year Note 10.

Florida residents, and others, have taken the opportunity of low interest rates to move in response to a new assessment of their accommodation, and the amount of time they expect to reside and work in their home in the future.

LOW INTEREST RATES and LOW INFLATION - The conventional wisdom was that high interest rates subdued inflation, but low interest rates would stimulate it. Perhaps it is the other way around! The Fed has been pumping 120bnNote 6 per month in to the economy in a move that both tends to hold down interest rates and puts cash into the system. The Fed has now said it will start to wind down this program over the next 8 months. But, the economy has been on 'steroids' so much and for so long, no one really knows how the economy will respond to being weaned off this strong medicine. The holiday season will be good for an uptick Note 7 but, supply chain issues did not just disappear and tension over vaccines maintains consumers in a state of nervous anxiety.

There is already talk of upward pressure on British Pound interest rates, Euro rates are predicted to rise by the end of Q2 2022 and while US$ interest rates are likely to lag those currencies, at some point the US $ will succumb to the pressure and also rise.

SO IN CONCLUSION - the price rises and shortage of properties for sale in the South East Florida market is repeated in other parts of the country. In the 2 years to Sept 2021 Rochester New York saw a 170% price increase Note 8. The most effective lever looks like fiscal policy.

My observation, over more years than I care to admit to, is that those that chose to buy the home they love, are the happiest. Others who believe they can sell at the top and buy on the dip, find this much harder in practice than it sounds in theory. Together with their real estate professional, buyers will be obliged to tread boldly in this otherwise alien property landscape.

AND THEN THERE IS THIS ARITHMATIC - If a hypothetical buyer decides to wait until there is a 5% price dip, but by that time interest rates have risen so the same mortgage costs 5.5% and not 4.5%. On a purchase of $350,000 with 20% cash down, they will have saved $18,000 on the price but they will pay an extra $14,300 over the typical 7 year home ownership period, but $60,000 extra in the event they have a fixed rate mortgage that they pay to the full 30 year redemption Note 5.

Note to notes - this research is from the internet; I set out the source detail in the following notes, so, anything you find to be important, please, double or triple check!

Note 1

The Florida Office of Economic and Demographic Research - a research arm of the Florida Legislature

http://edr.state.fl.us/Content/conferences/population/ComponentsofChange.pdf

Note 2

As estimated for the year to 2020,

http://edr.state.fl.us/Content/conferences/population/ComponentsofChange.pdf

Note 3

https://flhealthcharts.com/ChartsReports/rdPage.aspx?rdReport=ChartsProfiles.LeadingCausesOfDeathProfile

Note 4

Where People From Florida Are Moving to the Most

With its low taxes, year-round sunshine, and access to beautiful beaches, Florida ranks as the top spot for newcomers. Move.org reported that Florida was the number one destination in 2020 for people pulling up roots. Much of the migration was fueled by Northeasterners attracted by the state's lower cost of living and more relaxed lifestyle. … Continue reading

Unfortunately, the 50,000 number is an estimate - 24/7 Wall St had a feature that suggested the number was about 500,000 but these were people who said that had lived in Florida during the previous year and are not necessarily migrating from Florida.

Note 5

https://www.mortgagecalculator.org/

$350,000 less 20% cash imputes a mortgage of $280,000. These numbers are simple arithmetic and take no account of the time value of money.

Note 6

'Since June 2020, the Fed has been buying $80 billion of Treasury securities and $40 billion of agency mortgage-backed securities (MBS) each month.'

Note 7

531,000 new jobs in October I would suggest marks the beginning of the holiday season

Note 8

https://www.forbes.com/sites/andrewdepietro/2021/10/25/10-cities-with-the-biggest-jump-in-home-prices-of-2021/?sh=534d4a5b64f5

Note 9

http://blog.hbweekly.com/florida-residential-construction-review-q3-2021/

Note 10

Florida Housing Forecast 2023

Florida Real Estate Market Buyers and sellers are likely feeling a little more optimism about the housing market in February. Inflation seems to be easing, jobs numbers are strong, interest rates may be topping out and GDP numbers came in okay for the 4th quarter. That of course translates well for the state of Florida. … Continue reading