4 ms·
5% is that bad when you’re combining it with doubled house prices over the last 2 years
by symlinkk 5y ago
5% is that bad when you’re combining it with doubled house prices over the last 2 years
- mywittyname 5y agoThe 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 agoI 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 agoAgreed. 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 agoI 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 agoSure but a doubling in price has much more impact on your payments than an increase from 3%-5% on your rate