Interest rates are at historic lows, but how much do you know about the history of interest rates?
Some of the first data points in this series represent well-documented municipal debt issued in early Italian banking centers like Genoa, Florence, or Venice, during the beginning stages of the Italian Renaissance.
The early data sets of loans to noblemen, merchants, and kingdoms eventually merge with more contemporary data from central banks, and over the centuries it’s clear that falling interest rates are not a new phenomenon.
In fact, on average, real rates have decreased by 1.6 basis points (0.016%) per year since the 14th century.
This same spectacle can also be seen in more modern time stretches:
And as the world reels from the COVID-19 crisis, governments are taking advantage of record-low rates to issue more debt and stimulate the economy.
This brings us to our next set of charts.
The global pandemic has made a significant impact on global debt.
As of Q1 2020, global debt sits at a record $258 trillion or 331% of world GDP, and it’s projected to rise sharply as a result of fiscal stimulus, falling tax revenues, and increasing budget deficits.
A lot of fuss is made about the level of debt underpinned by Australian residential real estate.
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However the following chart from Corelogic is eye-opening
The total value of residential real estate in Australia (10.5 million dwellings) at the end of October 2020 was $7.1 trillio
Yet the total outstanding debt against all these properties is $1.8trillion.
Sure some first homebuyers and inexperienced investors have over committed themselves, but the overall loan to value ratio of residential real estate is in the order of 28%.
And in general this debt is held by those who can afford it.
There's no need to worry with the level of property debt in Australia, especially when interest rates are at 700 year lows
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