Quote:
Originally Posted by chedder
Inflation increased to 4.4% in April and first quarter gdp was 3.1%. The central banks concern isn't whether renewing mortgagors can afford the new payments. That's a small part of the whole picture. Purchases of interest-rate sensitive goods are increasing. House prices are increasing. The exact opposite of what you want to see if you're trying to decrease inflation.
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Yeah, but the counterpoint is that the rate hikes drive up housing in a couple ways. The first is the obvious that mortgage rates increase for people with variable mortgages, and people who are renewing from the mortgage they had a five year term on from 2018. Then you have rental increases because the underlying costs for the owner have increased (assuming they have an outstanding mortgage).
And lastly, it decreases the pool of would-be sellers, because that mortgage they have for say 2% would now be 5% on the new place. Decreased sellers means less inventory and we've been experiencing that for the past few months.