The Fed and interest rates

[SharperDingaan]

If you buy more house than you can afford, and get foreclosed on - what happens to you is on you.

At any time, you could have sold and bought a smaller house in the same location, the same size house in a cheaper location, or just rented instead. You could also have taken in lodgers, or shared ownership. Yet, you chose to do none of these things?

 

Nobody wins when somebody gets foreclosed - but it does force long overdue change.

And therein is the rub - it's not the way it was anymore.

 

SD

 

 

 

 

 

[Spekulatius]

Trump whining could be absurd but, the rate of change is the concern IMO and not absurd.

 

As I explained in my anecdotes in my original post, going from something like 2.8% to 3.5% in the course of one year on a mortgage represents a 25% increase in interest paid. This is very significant for lower income people.

 

Where is the outrage about income inequality here?

 

Moreover, I don't believe that economic impact is well understood at all on the combined effect with unwinding of QE.

 

So yes I am concerned. The Fed has never engineered a soft landing. Never!

 

Booms and busts are something that once again is very hard on lower income folks.

 

Cardboard

 

Lower income people probably rent rather than own.

[Cigarbutt]

^For various reasons, home ownership has followed the same curve as the US, but on a slightly delayed basis.

An argument can be made that a segment of the population (lower middle class and upper lower class) were "encouraged" (low interest rates, various policies etc) to buy homes in an unusually favorable environment. Regular folks who don't read the FOMC statements gradually realize that homeownership is no longer affordable and see rising interest rates at a time where wages are not following the cost of living.

 

A similar scenario is playing out for people making (financing) car purchases.

 

https://www.huffingtonpost.ca/2018/09/08/canadas-tradition-of-homeownership-is-at-risk_a_23520973/