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> not of access to capital I think I get what you mean with this, but I'm not sure I follow it completely. Banks are able to extend large amounts of credit th
by have_faith 2y ago
> not of access to capital
I think I get what you mean with this, but I'm not sure I follow it completely.
Banks are able to extend large amounts of credit that are backed by a small percentage of the credit offered. People are generally bad with money and will take what the bank offers them if they think they can afford the monthly figure. The bank and it's lending practices therefore seem to have an (indirect?) influence on how much money someone has to pay for a house, and therefore what houses sell for in the market. Whether all this does is reveal a houses true value in the market, as opposed to artificially increasing it, I'm not sure.
- robertlagrant 2y agoI probably agree with most of this, and definitely with your thoughtful last sentence, but the context is that the existence of mortgages has driven up house prices. I think this is a silly claim, because while almost no one being able to buy a house would lower house prices, it would do so in a net negative one.
- have_faith 2y agoIt sounds like there's two separate dimensions to this, price, and positive / negative outcome. It seems like it's possible for a banks mortgage lending practices to both positively increase access to mortgages while at the same time making houses more expensive. At first I think this is counter intuitive, but I think there's a logic to it. Whether this is a good tradeoff, is separate to whether the loaning itself increases house prices.