Some banks mostly offer fixed-payment variable mortgages which allows homeowners to keep monthly payments the same, but leaves them vulnerable to paying little off the principal, experts say.
Investors overbid for properties at yesterday’s low interest rates that aren’t sustainable at the current rates but at yesterday’s rents. Investors didn’t take into account that interest rates can rise. Let me rephrase. Investors bet that interest rates will stay low and thus took on huge mortgages so they could outbid another investor or wannabe homeowner. This bet didn’t pan out. Instead of taking a loss and selling the properties, they increase rents to what makes the properties sustainable at today’s rates. That’s it. Investors are asking for renters to cover their failed bet. The amount of housing is a more or less fixed in this equation given the short time frame these effects occurred on. That’s how this investor behaviour is making housing less affordable. Moreover it has a larger negative effect on the economy by tying up income into an unproductive asset class instead of having it flow to productive areas of the economy. And so the argument is made that we should curb this behaviour by helping investors make the decision to sell, in the short term. That would lower prices and allow wannabe homeowners to buy as well as more rational investors who have the capital to buy and sustain at today’s rates but lower rents.
Investors overbid for properties at yesterday’s low interest rates that aren’t sustainable at the current rates but at yesterday’s rents. Investors didn’t take into account that interest rates can rise. Let me rephrase. Investors bet that interest rates will stay low and thus took on huge mortgages so they could outbid another investor or wannabe homeowner. This bet didn’t pan out. Instead of taking a loss and selling the properties, they increase rents to what makes the properties sustainable at today’s rates. That’s it. Investors are asking for renters to cover their failed bet. The amount of housing is a more or less fixed in this equation given the short time frame these effects occurred on. That’s how this investor behaviour is making housing less affordable. Moreover it has a larger negative effect on the economy by tying up income into an unproductive asset class instead of having it flow to productive areas of the economy. And so the argument is made that we should curb this behaviour by helping investors make the decision to sell, in the short term. That would lower prices and allow wannabe homeowners to buy as well as more rational investors who have the capital to buy and sustain at today’s rates but lower rents.