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If the nominal prices stagnate or even go down, but mortgage interest rates go significantly up, there is no positive change in affordability for the average bu
by inglor_cz 4y ago
If the nominal prices stagnate or even go down, but mortgage interest rates go significantly up, there is no positive change in affordability for the average buyer. The monthly mortgage installment will stay high, only the principal/interest balance within it will change.
The sellers are the ones who will get less money, but the buyers, unless they have huge savings, won't benefit much.
- ReptileMan 4y agoThey will since they always can renegotiate their mortgage once interest rates go down.
- inglor_cz 4y agoThis is a good observation. Nevertheless, the worst obstacle in owning a home is actually buying it. Ten or fifteen years downstream, your principal payment likely represents a much smaller fraction of your income than it did when you bought the property, and you can renegotiate the mortgage in better times, as you say - so even the interest can be kept under control. But the first years of your first mortgage are a real challenge. You need to cough up the downpayment, you might have young kids to take care of, you might still be relatively low on the career ladder etc.
- rightbyte 4y agoThe buyer do benefit from lower prices. How is this even a talking point. It is as silly as counterintuitive. If there is less loan to pay back for the same asset, the loan taker benefits.