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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 w
by marvin 9y ago
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 9y agoBanks 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.