4 ms·

5% isn't so bad. I bought during the rate spike of 18 at around 5%, then had to watch as rates immediately fell again and I couldn't refinance until my mortgag

5% isn't so bad. I bought during the rate spike of 18 at around 5%, then had to watch as rates immediately fell again and I couldn't refinance until my mortgage "seasoned" for 10 months. Back during the housing boom, rates were 5-6%. So I'm not sure that this will cool the market all that much.

onlyrealcuzzo 5y ago
During the housing boom - everyone was getting balloon payment mortgages to avoid the 5-6% rates... That's what caused the housing bust. I'm sure - if allowed - we could see something similar. But IIUC this type of financing isn't currently plausible.
symlinkk 5y ago
5% is that bad when you’re combining it with doubled house prices over the last 2 years
- mywittyname 5y ago
  The issue is the doubling of housing prices though, not the interest rates. Historical evidence suggests that 5% is more than low enough to fuel a house-building boom. Plus, if you buy into the idea that interest rates dictate housing prices, then 5% rates should lower housing prices. I personally don't see this happening in our specific climate, but there's ample evidence that the two are negatively correlated.
  - voisin 5y ago
    I think 5% is just the start unless inflation rapidly reverses. I suspect the nominal rate is a lot less important than the effective real rate.
    - mywittyname 5y ago
      Agreed. Which is why I don't think 5% is that bad. It's barely above the average rate between the GFC and the pandemic (~4.25%). But inflation is much, much higher. The nominal rate should be important right now. The nominal rate in the before times was like 4% interest - 1-2% inflation. Now the nominal rate is 5% with 7-12% inflation. Normal people are absolutely going to start factoring inflation into the equation. Especially if inflation continues to drive wage growth.
- voisin 5y ago
  I concur. I am looking forward to hearing the response to the justification of the last two years that it was ok for prices to go up because interest rates had fallen and payments were the same. Seemed like bullshit to me then and now with rates increasing I don’t think prices are going to collapse to “keep payments the same”.
- adamsmith143 5y ago
  Sure but a doubling in price has much more impact on your payments than an increase from 3%-5% on your rate
88913527 5y ago
5% is bad after sellers got used to high sales prices at 2% (with lower rates, more of the payment goes to principal). They took away the punch bowl and the party is over. The rate itself (5%) historically is not high.
- DamnYuppie 5y ago
  I believe it was 3-5 year ARM's they were getting which had much lower rates at the time. A lot where taken out in 2002 and on. When those rate reset higher starting in 2006-2007 things started to unravel fast.

onlyrealcuzzo 5y ago

During the housing boom - everyone was getting balloon payment mortgages to avoid the 5-6% rates... That's what caused the housing bust. I'm sure - if allowed - we could see something similar. But IIUC this type of financing isn't currently plausible.

symlinkk 5y ago

5% is that bad when you’re combining it with doubled house prices over the last 2 years

mywittyname 5y ago
The issue is the doubling of housing prices though, not the interest rates. Historical evidence suggests that 5% is more than low enough to fuel a house-building boom. Plus, if you buy into the idea that interest rates dictate housing prices, then 5% rates should lower housing prices. I personally don't see this happening in our specific climate, but there's ample evidence that the two are negatively correlated.
- voisin 5y ago
  I think 5% is just the start unless inflation rapidly reverses. I suspect the nominal rate is a lot less important than the effective real rate.
  - mywittyname 5y ago
    Agreed. Which is why I don't think 5% is that bad. It's barely above the average rate between the GFC and the pandemic (~4.25%). But inflation is much, much higher. The nominal rate should be important right now. The nominal rate in the before times was like 4% interest - 1-2% inflation. Now the nominal rate is 5% with 7-12% inflation. Normal people are absolutely going to start factoring inflation into the equation. Especially if inflation continues to drive wage growth.
voisin 5y ago
I concur. I am looking forward to hearing the response to the justification of the last two years that it was ok for prices to go up because interest rates had fallen and payments were the same. Seemed like bullshit to me then and now with rates increasing I don’t think prices are going to collapse to “keep payments the same”.
adamsmith143 5y ago
Sure but a doubling in price has much more impact on your payments than an increase from 3%-5% on your rate

88913527 5y ago

5% is bad after sellers got used to high sales prices at 2% (with lower rates, more of the payment goes to principal). They took away the punch bowl and the party is over. The rate itself (5%) historically is not high.

DamnYuppie 5y ago
I believe it was 3-5 year ARM's they were getting which had much lower rates at the time. A lot where taken out in 2002 and on. When those rate reset higher starting in 2006-2007 things started to unravel fast.