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A comment on Bank of Canada increases overnight rate target to 1 per cent. Parent comment

Re:Bank of Canada increases overnight rate target to 1 per cent by 8ytecoder on Wednesday September 06, 2017 @01:43PM (#15185598)
As an example - if I get to reduce my mortgage payment by $500 - because interest rate is extremely low - I could technically spend that money on upgrading my car or travel or groceries or eating out - and so pushing up the price. At least that's how I understand it. I assumed that housing prices were included but apparently not (at least in the US)[1]

[1] http://www.nytimes.com/2011/04/02/business/02charts.html?mcu...

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Re:Bank of Canada increases overnight rate target to 1 per cent by faeriol on Wednesday September 06, 2017 @05:06PM (#15187142)
Keywords here being IF and COULD...

I'm under the impression most people are ready to spend a certain portion of their income on their living arrangement and low interest rates just encourage them to buy ~bigger~ more expensive property, rather than actually turning the "savings" into other types of spending. I'd be interested to find actual data and research about the relationship between interest rates and mortgage spending for given incomes...

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Re:Bank of Canada increases overnight rate target to 1 per cent by ThrustVectoring on Wednesday September 06, 2017 @05:56PM (#15187438)
Low interest rates directly drive up housing prices of equivalent houses. If you drive down monthly mortgage payments while keeping rents constant, buying residential property and renting it out becomes more economically attractive, which then drives up the house price at which buying an investment property is sufficiently profitable.

In other words, the fixed factor is the spot rent market - how much you can get renting out a house in a certain location. When you lower interest rates, the monthly payment remains relatively constant, which drives up the principle to compensate.

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Re:Bank of Canada increases overnight rate target to 1 per cent by GatorD42 on Wednesday September 06, 2017 @04:51PM (#15187036)
The CPI in the U.S. does count shelter in its index. It is not very accurate because of issues measuring the prices of consumer electronics which are getting better and cheaper. See https://medium.com/@vince.pavlish/using-iphone-prices-to-che...
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