271–280 of 331 posts
The key term here is Danes, not residents of Denmark, but individuals who are born or naturalized Danes, even many of the naturalized ones do not get the same rates. By default Danes get ~5% downpayment where none Danes get ~40%.... yay
Afaik, the norm is 20% down, but the banks will loan you another 15% at a higher rate if you want that.
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>You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why. I stopped into a car dealer to look at a vehicle a couple years ago. I liked how it drove, could pay cash, but wasn't opposed to taking out a loan if I could get a better price overall (sometimes possible with fees banks pay to used dealers for getting a loan originated). In my experie…
Exact same experience here. The salesman (and his manager, lol) just couldn't grok that I don't care a shred about what monthly payment they can math their way into. I'm looking at the total price of the car. It was like we were speaking totally different languages. Even after I tried to explain it with "Let's assume I'm going to pay cash..." they kept trying to steer me into their finance department. Obviously they…
He held up his end of the deal, paying 18% interest on a massive truck loan for 3 months.
The sad thing is many people would do the same thing without the ability to pay it off in full. At that interest rate and a ~7-10 year loan term, you'll be upside down on the vehicle until the very end of the loan. And most people wouldn't keep the vehicle that long because something else changes in their life...or they just want a newer vehicle.
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We did a little bit in the 90s when interest rates increased, and I think the rate increase in the late 2000s was responsible for at least some of the drop in home values, although how much was obscured by the housing bubble, and low interest really acted like a multiplier there. https://fred.stlouisfed.org/series/CASTHPI https://fred.stlouisfed.org/series/FEDFUNDS But you're right in the sense that we haven't seen t…
That's because interest rates having generally trended down from the mid-teens to zero in the past forty years. Unless we're willing to go negative, that cycle is coming to an end.
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Sure, but the point is the buyer only looks at the price as a function of the payment they can afford. If the buyer can afford 2k/month they don't really care which part moves. Rates or price? If that means high rates and lower price? Fine. Low rates and higher price? Fine, but carries more risk as you (and I pointed out).
Certainly true. Though higher price with lower rates, assuming monthly payment is the same, can be beneficial as a larger percentage of your payment goes towards principal. That only holds as a positive if price doesn't drop due to interest rate increases. But I'd definitely rather be buying a house in a high interest rate environment... don't like the tail risk given how low rates are.
Don't forget the tail risks of inflation.
The risk of not buying a house in a low-rate environment is that inflation takes off, the price of the house goes up 10x to match the price of everything, your rent goes up alongside everything else, but the people who bought still have the same payment as before. Interest rates went up to ~18% in 1981, but that still didn't take average prices down from the $47K in 1980 back to the $17K they were in 1970. A real estate bear market is usually 10-20%, not the 3-10x that home prices go up in a high inflation environment.
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I don't think there is a single tipping point the way you think. The same is true now if you consider the other ways you can spend your capital. a -1% rate on a mortgage with 20% down payment is effetely a 4% annual return on investment. If you can make 10%/yr in the stock market. and your mortgage is 3%/yr you should be maxing out the loan already and putting your cash back into stocks to make the 7% difference, not…
The reason folks don't do this is in your last sentence: stocks are not risk-free, and you're vulnerable to market downturns. Or sometimes people do do this, and they get swept out of the market when a downturn happens. Same thing with bonds, mortgages, and loans: there's default risk. Taking out debt at a negative interest rate has no such default risk: since you borrowed the money in the first place, if you default…
I don't think this is accurate, as there is still risk because we are talking about a mortgage, not just a negative interest loan. A mortgage comes with down payment and a house for collateral. You can end up underwater on an interest free home mortgage just as easy as one with a positive mortgage. The only difference is your monthly payment is lower without mortgage interest.
Also, if you default on the mortgage, you are also out your 20% down payment.
The part I find interesting about the current situation is that stocks are sky high going higher, but loan interest is low. This indicates to me that banks and institutions are desperate to park money anywhere but the stock market despite the incredible market performance.
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> This means that for most people, the best time to buy a house is when interest rates are sky high since falling rates are easy to take advantage of in the future. They can stay high or low for quite a long time...
You're right, and anyone buying a house today is banking on them staying low. But what other option do they have? If interest rates go up to 6-7-8%...double digits, the housing market would be a bloodbath.
Mortgage rates: https://themortgagereports.com/61853/30-year-mortgage-rates-...
Housing prices: https://inflationdata.com/articles/inflation-adjusted-prices...
Inflation-adjusted housing prices went down about 20%. Nominal home prices basically stayed constant for about 2 years, then resumed marching upwards.
Also note that the actual bloodbath happened from 2006-2012 (when the housing crash took prices down about 35%). It does not correspond to any major increase in interest rates. The primary driver seems to be foreclosures, which in turn was driven by ARMs and poor lending standards. Conclusion might be that interest rates just don't matter that much as long as a majority of people are on fixed-rate mortgages, while they can matter a lot if folks are on ARMs they can't afford. (Interestingly, we may get a similar crash of multi-family housing in the near future, since all the tenants not paying rent now is having a similar effect on mortgages.)
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In Norway, personal bankruptcy requires an application to the debt enforcement office (a local government authority). If the application is accepted, the debtor gives up all their assets and submits to paying all of their earnings towards their debt, for five years. A politically determined subsistence sum is all they get to keep for themselves. After five years, the agreement ends and the debt is cleared. Each perso…
Yikes. As an American, I would have thought Norway would have a much more lenient form of debt relief based on everything I hear about Scandinavia from our local press. But what you're describing seems incredibly harsh. I wonder if this is why Norwegians tend to be more financially responsible. Only being able to declare bankruptcy once certainly would make people learn their lesson? Is that true? Does it work in pra…
I don't know how our delinquency rates compare to the rest of the world, but there's quite a bit of it. My take is that these laws are due to somewhat unflattering protestant cultural heritage, rather than a deliberate decision to encourage financial responsibility. I struggle to see how the possibility of lifelong debt slavery is moral.
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When I decide to buy a $25k car because that's as much as I'm willing to spend I still need to determine what my "monthly" is. It matters what my monthly is because it is _a loan_ that I need to pay back every month. If I didn't need to think about what the monthly payment was I wouldn't need to take out a loan (unless I guess you got a magical loan that could only be paid off as a lump sum?). You're implying "worryi…
> When I decide to buy a $25k car because that's as much as I'm willing to spend I still need to determine what my "monthly" is. I haven't owned a car and i'm almost 30, and have always enjoyed public transport so far. When I'll decide to buy a car, I'll just f-ing pay it in full and be done with it.
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If interest rates go up 6-7-8%, inflation would give most people an almost free house. Rent it out instead of selling and you have income for life.
Eventually, but salaries tend to lag inflation. Also would depend how quickly rates went up.
My mom was a teacher and said that when she graduated in college (late 60s), teacher salaries were maybe 20-30% below engineer/lawyer/professor salaries. By the time I was born (early 80s) her classmates in those professions were making 3x what she was.
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Banks wouldn't offer a loan for zero interest if they have to "buy" money for interest. In these type of situations, they are either lending at negative interest rate from the central bank, or they are paying interest to central bank for "safekeeping" (central bank is at negative interest rate) or consumers are keeping money in banks at negative interest rate (less likely). What makes money for the bank is the differ…
Loans have a cost. If the banks can borrow at negative interest rates they are strictly better borrowing the money and not lending it out compared to a 0% loan. Any profitable plan with a 0% loan in it would in theory be more profitable without the loan. In econ-101 it doesn't matter what the spread is, it isn't in itself rational to lend at 0%. That is taking on risk with no gain. There must be some strange contorti…