Re:Subprime loans for college hiding in plain sight
by twblalock on Friday September 23, 2022 @02:24PM
(#32955422)
Mortgate rates went from ~2.5% in 2021 to over 6% right now for a 30-year fixed-rate mortgage and the housing market is doing just fine. When rates go up, people lower prices, but not by a lot.
Ultimately the price of housing is determined by supply, not interest rates, and supply is still historically low.
So does raising interest rates - see 2008. Look at the fed funds rate spike which set it off (not to say there weren't other problems to make it worse). Also look watch the housing market right now.
Housing as a percent of income has been fairly constant for 50 years (there was a recent HN link on this). Lower interest rates mean you can borrow more dollars at the same monthly payment. This combined with an overall decrease in rates since 1980 have fueled the housing market.
Long terms loans just mean building equity takes a long time, and people who sell within 5 years really don't have any (it will maybe cover moving costs). The problems with interest rates changing and putting people under water are really a problem of people not having equity in their home. Reducing the length of the loans will reduce that problem significantly.