4 ms·

Not gp, but it seems clear to me that that low interest rates are bad for new home buyers, and only good for people holding mortgages as they drop. That might

Not gp, but it seems clear to me that that low interest rates are bad for new home buyers, and only good for people holding mortgages as they drop. That might be what you and gp both mean.

mytailorisrich 4y ago
> but it seems clear to me that that low interest rates are bad for new home buyers Well no. Low rates are by definition good for everyone who borrows money. Edit: There is a strange assumption it seems that low rates are the cause of the increase in property prices and that there is essentially a bubble. If the banks accept to lend then low rates do allow people to borrow more, but claiming that high rates would be "better" or that this causes unreasonably "inflated" prices are a few steps too far. Higher rates are not going to help you if you want to get onto the property ladder, and they are not going to help either if you are already on it.
- patrickthebold 4y ago
  When buying a home, people care about the total amount of money they will spend. They do not particularly care if the seller or the bank gets their money. If 'the market' decides a property is worth 3000/month, interests rates directly impact the selling price of the home. Of course, I'm playing a trick by having the market price the monthly mortgage payment, and not price the property. Some people aren't going to take a mortgage so they care about the selling price only. But I'd argue that most people care about their monthly payment. Now compare two scenarios: You by a home for 3000/month mortgage with a high interest rate, then rates drop. You by the same home for 3000/month mortgage with a low interest rate, then they rise. In the first case, you can either refinance if you rate was fixed, or if it's adjustable your monthly payment drops. Any your home value goes up for the reason already mentioned. In the second case, if it's fixed, that's good, but you lose that rate if you sell,if its adjustable your monthly payment goes up. And your home value goes down for the reason already mentioned.
- LilBytes 4y ago
  Except the asset you're buying from low interest rates has balooned in value meaning your purchasing power still went significantly backwards.
- KptMarchewa 4y ago
  It's not a stretch to claim that loose, expansionary monetary policy causes asset bubbles.

Not gp, but it seems clear to me that that low interest rates are bad for new home buyers, and only good for people holding mortgages as they drop. That might be what you and gp both mean.

mytailorisrich 4y ago

> but it seems clear to me that that low interest rates are bad for new home buyers Well no. Low rates are by definition good for everyone who borrows money. Edit: There is a strange assumption it seems that low rates are the cause of the increase in property prices and that there is essentially a bubble. If the banks accept to lend then low rates do allow people to borrow more, but claiming that high rates would be "better" or that this causes unreasonably "inflated" prices are a few steps too far. Higher rates are not going to help you if you want to get onto the property ladder, and they are not going to help either if you are already on it.

patrickthebold 4y ago
When buying a home, people care about the total amount of money they will spend. They do not particularly care if the seller or the bank gets their money. If 'the market' decides a property is worth 3000/month, interests rates directly impact the selling price of the home. Of course, I'm playing a trick by having the market price the monthly mortgage payment, and not price the property. Some people aren't going to take a mortgage so they care about the selling price only. But I'd argue that most people care about their monthly payment. Now compare two scenarios: You by a home for 3000/month mortgage with a high interest rate, then rates drop. You by the same home for 3000/month mortgage with a low interest rate, then they rise. In the first case, you can either refinance if you rate was fixed, or if it's adjustable your monthly payment drops. Any your home value goes up for the reason already mentioned. In the second case, if it's fixed, that's good, but you lose that rate if you sell,if its adjustable your monthly payment goes up. And your home value goes down for the reason already mentioned.
LilBytes 4y ago
Except the asset you're buying from low interest rates has balooned in value meaning your purchasing power still went significantly backwards.
KptMarchewa 4y ago
It's not a stretch to claim that loose, expansionary monetary policy causes asset bubbles.