- cross-posted to:
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- cross-posted to:
- [email protected]
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While I like the idea of a lower interest rate, I also wonder what it will do. Will it drive housing prices up? Will it stimulate the economy by encouraging people to take debts and loans?
Did they lower rates to encourage people to take out loans?
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Yes. Many people budget the most they can afford in mortgage payments to identify how much to pay for a home. Lower interest rates -> lower mortgage payments per $100K -> more money they can offer for the house -> house prices go up.
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Not just “people”, either. Interest rates are the main cost of expanding business activity. Lower interest rates means it’s cheaper to start or expand a business.
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Yes. Borrowing $100K just became $500 cheaper for each year the loan is held. With interest compounding over time, this has a much bigger impact the longer the term of the loan (mortgages and business loans are the biggest and longest, generally).
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Yes, yes, kinda yes.
It always drive prices higher.
Always is a strong statement but yeah thays how it generally collerates
We’re in an era where corporations are buying housing at an unprecedented rate.
They have deep pockets, so even though the people holding mortgage will see relief, we will also see more housing bought by corporations.
The normal person cannot compete with the corporations, and they will have to either outbid the corporation, or hope that the seller find their storing touching and sell them the house even if the bid is lower.
So yeah, prices will raise for sure.
I’m surprised but not really.
This is what was meant by the inflation is transitory line, the timelines are just much longer and the effect is more painful than people expect.
I’m hoping this injects some serious stimulus into the housing construction industry to boost housing supply, but I would have liked to see the government offering direct low interest loans or even construction bonds with tight default rules or co-ownership stipulations.
Stimulus in way of rising housing prices where affordability becomes harder and harder to reach for the masses, yes it will. But we’ve seen this for the last 15 years. It ain’t the interest rates that’ll boost supply to solve our housing problem. It’s the supply constraints - ie labour, red tape including building restrictions, nimby, air b&b etc that are holding things back.
Yeah, they’re not going to be affordable, but more supply is more supply in a shortage.
I’m on board with easing constraints so long as homes are built soundly and owners aren’t left holding an expensive crumbling house.
I think the building restrictions parent poster was referring to are density restrictions.
As an example, there are narrow strips of Toronto along major roads that allow skyscrapers, a lot of it a block away from single-family-home zoning. So all the demand for multi-unit housing bursts up in narrow corridors.
If, instead, quad-plexes became universally allowed, and lot height limits were increased to 3 (or 4? idk) stories, then single-family homes could be torn down or renovated to make room for up to 4 families to live comfortably on the same land.
Rosedale shouldn’t exist. Single-family homes a short walk from downtown Toronto is a big part of why people are commuting from Barrie.
West Van is just as bad. Even small towns in desirable areas are seeing density restrictions causing a missing middle in housing.