Currently in Canada we have low mortgage rates and high home prices. I get the vibe from reading different articles that people actually want mortgage rates to go up which would lower the home prices.
Can someone please explain what are the advantages of one situation over the other (from a buyer's perspective, or both)? I think at the end home price and mortgage rate fluctuations cancel each other anyway - you pay the same total amount.
If the payments were equal, I'd prefer to be in a time of high rates when buying. If the direction of rates at that point were down, my future home price is likely to rise and I'll have the opportunity to refinance to a lower rate.
The housing crash was complex, due to fraud as much as anything, but it's fair to say that when you pay more for a house but have a low rate, you run the risk of the house value falling as rates rise and then getting hit again when you need to sign up for the next financing (I understand in Canada there's no 30 year fixed? That you finance 5 years at a time? Is this correct?)
Check out http://www.mortgagecalculator.org/ and play around with the numbers, there is a balance, but it also depends on other factors, how long will you be in the house for example. They do offset each other. Low home prices can go up, after you buy, and you can always refinance. I think I prefer low home prices myself.
High mortgage rates tend to lower prices, but market sentiment and economic conditions govern house prices more. I don't know if the two factors cancel out. I would be concerned about buying an expensive house at a low mortgage rate and then having prices fall and rates rise, because you will owe the bank more than the value of the house: a serious problem if you lose your job. For what its worth, I think prices will fall in Canada and most of the rest of the world.
I think houses are subconsciously priced at so much per month (similar to how cars are frequently sold).
I watched one market reduce property taxes drastically and all the houses in the area had a significant price jump. If you were buying into that area, then both before and after the tax change your payment was the same amount.
If you are interested in paying down your mortgage and owning your home (this doesn't describe everyone) than I'd be more excited about lower prices than lower rates.
