4 ms·
I've never understood why offering adjustable mortgages to people at the edges in the credit calculations isn't guaranteed to create a housing crash when rates
by yakak 4y ago
I've never understood why offering adjustable mortgages to people at the edges in the credit calculations isn't guaranteed to create a housing crash when rates go up.
A significant number of people will absolutely have to sell as they can't afford the new monthly payment, and the value has just dropped for anyone who can model probable futures, and a significantly smaller number of people will buy given the raise in mortgage costs.
- mrep 4y agoIn the US at least, 90% of mortgages are fixed for the entire 30 years so that isn't a problem [0]. [0]: https://www.debt.org/real-estate/mortgages/30-year-fixed/#:~:text=With%20all%20this%20boosting%20it,backed%20mortgage%2Dguarantor%20Freddie%20Mac https://www.debt.org/real-estate/mortgages/30-year-fixed/#:~....
- lazide 4y agoRegardless of fixed or ARM, the market takes awhile to really shift. Most adjustable mortgages take 5-7 years to reset rates, and 30 year mortgages if you got one at a low rate is low risk (from a monthly payment perspective), assuming no one loses their job. That means existing owners can often hold on for awhile. It will dry up new buyers and the already low liquidity markers lock up though as new buyers at the existing prices disappear.