>> Making the loans shorter will make monthly payments scale up, making mortgages less affordable for people.
Pay attention when you get a mortgage. It goes like this:
1) what is your monthly income?
2) what are your monthly expenses?
3) calculate: this is how much we think you can afford to pay per month
4) back calculate: this is how much we will approve you to borrow.
5) Typical money available determines house prices.
The key here is that #4 means housing prices are hugely influenced by interest rates, and also the length of the loan. Housing as a percent of income is actually fairly constant because they'll everyone wants to get you for as much as they can, but the bank balances that against risk of default so there is a limit.
That's my rant. Reducing the length will cause people to build equity faster and will reduce volatility and the dangers of things like interest rate hikes.
Pay attention when you get a mortgage. It goes like this:
1) what is your monthly income?
2) what are your monthly expenses?
3) calculate: this is how much we think you can afford to pay per month
4) back calculate: this is how much we will approve you to borrow.
5) Typical money available determines house prices.
The key here is that #4 means housing prices are hugely influenced by interest rates, and also the length of the loan. Housing as a percent of income is actually fairly constant because they'll everyone wants to get you for as much as they can, but the bank balances that against risk of default so there is a limit.
That's my rant. Reducing the length will cause people to build equity faster and will reduce volatility and the dangers of things like interest rate hikes.