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The principle paid down on those repayment mortgage came from homeowner income and was diverted away from other savings and investments. Punishing millions of
by nly 2y ago
The principle paid down on those repayment mortgage came from homeowner income and was diverted away from other savings and investments.
Punishing millions of people who just sought housing security because, for reasons beyond their control, the Fed decided to cut rates after the GFC and keep them low for 15 years is just not tenable.
Fortunately, in the UK at least, it looks like (nominal) house prices will remain stagnant until real earnings catch up with rates. A better all round solution.
- credit_guy 2y agoThe vast majority of the homeowners would not lose their principal. They would lose some of their paper profits.
- nly 2y agoAt the sort of correction you're talking of you're talking about millions of people going in to negative equity. In the US market this may be tolerable because you have full-term mortgages, so people can just stay put even if they're pushed in to negative equity. In the UK it's death. Here mortgages typically last for 2-5 years. Homeowners would be pushed in to negative equity and be unable to remortgage.
- AzzieElbab 2y agoCanada is similar to the UK. I don't see any way out other than productivity-driven growth and building more housing. Both seem extremely unlikely