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How does the housing market work in countries with negative interest rates, I am assuming the home loan rates are very very low so does that lead to a boom in h

by sumedh 5y ago

How does the housing market work in countries with negative interest rates, I am assuming the home loan rates are very very low so does that lead to a boom in house prices?

hetspookjee 5y ago
The housing market in the Netherlands is a complete train-wreck for almost a decade. The climate crisis pressing down on the ability to build new houses, the negative interests rate and a flailing government makes matter consistently worse. In Q1 2021 the prices rose with almost 12% compared to previous year, and the prices are rising almost quicker and quicker by each month, with no clear end in sight. Yes, the loan rates are on a historical low, but have been already for a few years now.
- Aeolun 5y ago
  Trying to move back to the Netherlands, but I despair of ever trying to buy a house there. Half a million is not uncommon for the area I’m looking :/ and that’s in a tiny suburb half an hour from Amsterdam. Like, salaries do not seem to have similarly risen, so who the hell is buying these houses?
  - Ekaros 5y ago
    Salaries don't need to raise when interest rates drop. For same payment with lower interest rates you can service much higher principal. For example at 1000€ month 5% rate you could loan 151 525€ but with 1% rate you could loan 217 441€...
    - Aeolun 5y ago
      True. The problem is that housing prices have risen by several hundred percent.
  - Shaddox 5y ago
    >Like, salaries do not seem to have similarly risen, so who the hell is buying these houses? People and institutions looking for a way to 'park' their funds in a safe investment.
martin_a 5y ago
You can observe this (at least) in Germany right now. (Probably all over Europe, though.) Interest on saving accounts is < 1%, loans are cheap, so everybody's trying to buy houses right now. House prices are rocketing up. There will be lots of tears and people will lose their home once this starts to change and the fixed rates run out on some of those very cheap loans.
- Ekaros 5y ago
  How common fixed rates are? In Finland they are mostly 12 month Euribor(currently at -0.501%). Ofc you can buy "rate cap" type of service, but even those are limited length...
  - patrickk 5y ago
    In Germany, you can get fixed rate mortgages from 10 to 15 years around 1% interest. It's fuelling a housing bubble of course.
- Loughla 5y ago
  >and the fixed rates run out I think I'm confused. I have zero experience with Germany, so please be graceful with what may be a stupid question. So you're saying the super low rate is only for a set period of time, and will change at some point in the future, correct? If the rate is set to change at some point, you can't really call it a fixed rate, can you? I thought fixed rate meant that it was just that rate for the life of the loan. Hence, fixed versus variable. What am I missing?
  - WhiteListed 5y ago
    Most banks offer a fixed rate for an x number of years while you pay your mortage in 30 years. The lower x is, the lower the interest you pay during those years. For example, banks can offer the following loans: - 20 year fixed rate at 1.30% - 30 year fixed rate at 1.42% So there is a possibility to gamble with the interest rates while still having a "fixed" rate.
  - saiya-jin 5y ago

by sumedh 5y ago

How does the housing market work in countries with negative interest rates, I am assuming the home loan rates are very very low so does that lead to a boom in house prices?

hetspookjee 5y ago

The housing market in the Netherlands is a complete train-wreck for almost a decade. The climate crisis pressing down on the ability to build new houses, the negative interests rate and a flailing government makes matter consistently worse. In Q1 2021 the prices rose with almost 12% compared to previous year, and the prices are rising almost quicker and quicker by each month, with no clear end in sight. Yes, the loan rates are on a historical low, but have been already for a few years now.

Aeolun 5y ago
Trying to move back to the Netherlands, but I despair of ever trying to buy a house there. Half a million is not uncommon for the area I’m looking :/ and that’s in a tiny suburb half an hour from Amsterdam. Like, salaries do not seem to have similarly risen, so who the hell is buying these houses?
- Ekaros 5y ago
  Salaries don't need to raise when interest rates drop. For same payment with lower interest rates you can service much higher principal. For example at 1000€ month 5% rate you could loan 151 525€ but with 1% rate you could loan 217 441€...
  - Aeolun 5y ago
    True. The problem is that housing prices have risen by several hundred percent.
- Shaddox 5y ago
  >Like, salaries do not seem to have similarly risen, so who the hell is buying these houses? People and institutions looking for a way to 'park' their funds in a safe investment.

martin_a 5y ago

You can observe this (at least) in Germany right now. (Probably all over Europe, though.) Interest on saving accounts is < 1%, loans are cheap, so everybody's trying to buy houses right now. House prices are rocketing up. There will be lots of tears and people will lose their home once this starts to change and the fixed rates run out on some of those very cheap loans.

Ekaros 5y ago
How common fixed rates are? In Finland they are mostly 12 month Euribor(currently at -0.501%). Ofc you can buy "rate cap" type of service, but even those are limited length...
- patrickk 5y ago
  In Germany, you can get fixed rate mortgages from 10 to 15 years around 1% interest. It's fuelling a housing bubble of course.
Loughla 5y ago
>and the fixed rates run out I think I'm confused. I have zero experience with Germany, so please be graceful with what may be a stupid question. So you're saying the super low rate is only for a set period of time, and will change at some point in the future, correct? If the rate is set to change at some point, you can't really call it a fixed rate, can you? I thought fixed rate meant that it was just that rate for the life of the loan. Hence, fixed versus variable. What am I missing?
- WhiteListed 5y ago
  Most banks offer a fixed rate for an x number of years while you pay your mortage in 30 years. The lower x is, the lower the interest you pay during those years. For example, banks can offer the following loans: - 20 year fixed rate at 1.30% - 30 year fixed rate at 1.42% So there is a possibility to gamble with the interest rates while still having a "fixed" rate.
- saiya-jin 5y ago