Is there a “natural” interest rate that currency would have w/o central bank intervention?

Yes, that would be the market interest rate based on supply/demand, as any other good. If supply >> demand (a lot of people have a capital they don't know what do to with) then you get a low interest rate, otherwise a high interest rate.

Centrally controlled interest rates are basically price controls. The govt controls the price of money. Even a 5 year old knows price controls don't work, but we can't expect that from the govt.

Even a 5 year old knows that there's a significant difference between price controls in a supply-constrained market and price controls in a supply-unconstrained market, and that it's intellectually inappropriate to gloss over that difference, and pretend that bank loans that print money up out of thin air are the same thing as, say, automobiles and frozen orange juice.

I’m well over 5 years old and this doesn’t make much sense.

Probably by not giving people loans for houses, which would make them equally unaffordable for people, but in a different way.

A 400k house might instead be a 200k house, but you will never have 200k in cash compared to 20k for a down payment on a mortgage.

Moneylenders have always existed when legal.

There would absolutely still be mortgage lenders without artificially low federal funds.

I manage a fund in Canada that does exactly that. We have a pool of investors, and lend out on mortgages only. Primarily in markets larger institutions won’t touch.

> would absolutely still be mortgage lenders without artificially low federal funds

30-year fixed-rate mortgages for middle earners are a policy creation, not a natural market creature.

30 year fixed rate mortgages aren’t available in Canada. Most have the interest rate adjusted every 3-5 years

That’s my point. There is no natural market for 30-year fixed-rate mortgages to the middle class.

Hard to argue that a 50% price reduction is less affordable. Ever heard of owner-financing?

I think it's 10-12%. That's the rate I am able to get money from private investors at.

What rate would you feel comfortable loaning money to friends or colleagues at?

Yes, loans predate central banks by a long shot. They were prevalent in ancient Rome and interest rates were determined by the market based on risk, supply and demand, etc.

Interest rates from lenders are still based on risk/supply/demand etc.

The question is more, how do you introduce money to the money supply (which you must do if for no other reason than physical wear/destruction of currency) without a central issuer who sets an interest rate on that issuance?

Banks create money out of thin air when they originate loans. Various regulations and central bank activities are designed to control this process, but they are somewhat indirect - they don't tell a bank 'this is exactly how much money you are allowed to create', instead they enforce things like capital ratios and provide liquidity in various ways, and the money creation is then carried out by the bank rather organically.

And can’t they currently set whatever rate they want for that still?

Indeed. Strongly influenced by the ambient financial and regulatory environment of course.

The ability to get a loan for some % of income over 30 years also props up housing prices. If the standard mortgage term were shorter, housing prices would arguably have less upwards pressure (but this might make it harder for lower income participants to compete with higher wealth participants.)

This is mostly only true in cities where lot prices are super high - which actually isn't the case in the majority of US cities.

It's hard to imagine commodities being substantially cheaper if we didn't have 30-year mortgages.

Home builder margins aren't impressive.

The cost of a new home is pretty much the cost of the lot, plus the cost to build it, plus a 10-20% margin.

That margin isn't going down a lot, even if you don't have 30-year mortgages. All that's happening is that the size of US homes would be much, much smaller.