Comment by jz391

They do, because if you cannon keep up with the repayments, the loan (mortgage) is secured on the house. So the bank will take possession of the house & sell it as quickly as possible (because banks don't want to own houses), which means they won't get a great price. Additionally, when people can't make mortgage payments, it's likely to be a bad time for the economy, meaning prices of houses will be low. All this creates risk for the bank, and rising house prices reduce this risk (it is more likely they will recover most/all of their money if they need to). That in turn means they will lend the mortgage at a lower rate than otherwise.