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Right; not an expert in the topic, but it seems to make sense that super low interest rates + the fed actively buying morgtage-backed securities would pump up h
by dilap 5y ago
Right; not an expert in the topic, but it seems to make sense that super low interest rates + the fed actively buying morgtage-backed securities would pump up housing prices. (Indeed, I think propping up asset prices is the idea? Though I'm confused why this is considered a good thing.)
Someone who knows more about this, please weigh in...
- Tycho 5y agoI think the asset price inflation is a secondary benefit (and may help if it makes people feel wealthier and more likely to spend/invest). The main goal of the Fed's asset purchases is to lower long term interest rates (they can only directly control short-term rates). This makes borrowing more affordable for everyone.
- bryanlarsen 5y agoThe main goal is to prevent a recession. They do this by encouraging spending. They encourage spending by making money cheaper. They make money cheaper by buying bonds using their money printer. This makes interest rates cheaper.
- chadcmulligan 5y agoA reason I've heard is that small businesses borrow against their home equity usually, so if you're house is worth more then more money to pump into your business, this is a good thing so they say.
- imtringued 5y agoYou pay $1000 per month for 30 years. At 0% you get to spend all of it ($360k) on the house. At 5% you get to spend most of it on interest.