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Raising interest rate will limit number of people that can/are willing to take a mortgage, which will limit the demand, which will make house prices to go down.
by dpc_pw 11y ago
Raising interest rate will limit number of people that can/are willing to take a mortgage, which will limit the demand, which will make house prices to go down.
Raising interest rate will limit the investments, jobs, salaries, which will make more people default on their houses. Which will boost the above effect.
So yeah, you can buy a house for X, with a nice tiny interest rate, but your house soon might be worth 3/4 * X or even 1/2 * X.
The time to take mortgages is when rates are being lowered, not when their being raised. The rate itself is not very important. When interest rates are high, the prices are lower. When interest is lower the prices are higher. It's the dynamic (change in interest rate) that is important. You want the person you can sell the house to, be able to pay you more than you paid.
* Note, I'm not an expert, I might be wrong. This is not a investment advise.
- AnimalMuppet 11y agoYeah, the effect you describe is very real. It's because the demand price curve for houses is set by the monthly payment, not by the total price, and the monthly payment depends on both the price and the interest rate. So what you ideally would like to do is buy when the interest rates are high (and prices low), then refinance as the rates drop, and get both lower payments and increased total value. But rates aren't going to drop for quite a while, so now what do you do? It seems to me that prices are low for how low the rates are, so buying is still (to me) a reasonable decision. > * Note, I'm not an expert, I might be wrong. This is not a investment advise. Ditto. Also note that I already own a house, so I'm not taking my own advice, either.