Just yesterday, I wrote an article ab out the continual push to force people into life as a renter and this morning I woke up and read that Trump is planning on extending the loan time on housing from 25 to 50 years to combat affordability, by making repayments lower. Sounds great right?
Sweden has 105-year loans and do you know what has happened since they were introduced? You guessed it, the price of homes increased significantly. As did rents. Because when people don't have to pay back as much per month, they take bigger loans, and can therefore spend more on a house, pushing up prices. What this effectively did was increase the value of houses to the point that they became unaffordable again, despite the long loan period.
If any government really wanted to affect the affordability of housing, it isn't by increasing the loan period, it is by decreasing the loan period. An increasing period just says that whatever measures they have taken to combat inflation in the economy, has failed. If the average person would be able to say, own their home in 15 years instead of 25 years, it would be an indicator of successful measures taken on affordability, because it would mean that the gap would be decreasing between real wages and the value. Instead, it is going the other way.
Economic policy fail.
Do not buy into this shit. It is an attempt to stimulate consumption by giving people more disposable income, which it will, but will also end up with people owning less. Instead of using that extra money to invest (which some will also), most will use it to just buy more crap that will very quickly become valueless. This ends up putting more money in the pockets of the wealthy, who will then invest that money in various ways that will push cost of living up again for everyone. Ultimately, it will lead to the majority of people being in a worse position than they are now, with less possibility to do anything about it.
What a longer loan period also means is that it is possible for more people to invest into property, which again pushes prices up and pushes those rental prices up also. While in the short-term there is a large amount of money flow into the economy from the surplus "savings", this means inflation will also increase which sucks more money out of the pocket of ordinary people, offsetting the length of the loan reduction. People will own less, and end up in the same debt-stressed position, with an even longer obligation.
People are not going to listen.
The reason is, that the majority of us think far too short in terms of our own financial wellbeing, and those who think long know it. It means that they can build an economy that is made to punish the short-term players and pad their pockets and build an unassailable economic position of both wealth and control over everyone else. Extending the loan period is just another way to extend the value milking process of rentseekers, and the future us will look back and realise it, as will our children, who will inherit nothing more than debt, or a rental agreement so they can stay in their childhood home, that their parents never had a chance to own.
The "affordability crises" that we are seeing now is due to the mismanagement of policy in all aspects of the economy, from the way corporations are incentivised, the way wages are paid and calculated, tax considerations and inequalities, debt management from financial institutions and retirement funds. Plus, a thousand other factors that keep increasing the wealth gap. Because the wider that wealth gap becomes, the more the average person is impacted by affordability.
And it is closing gap that needs to be addressed, but the incentives and policies are all aligned to keep it widening, because that is what the system is designed to do, and those making the policy are very much benefiting from the system they have designed. The average person is not benefiting though, because the are the ones being milked in order for that tiny fragment of society to exponentially increase their wealth.
Handouts are not the answer.
Again, a handout is just going to be given in order to stimulate the economy, which is exactly what happened five years ago and was a major factor in driving up inflation. Rather than improving affordability, it made everything more expensive, and allowed the companies to maintain or increase their profits, despite supposed supply chain cost increases. And once the prices go up, they never come down again, so while the handouts ended, people's real salaries have shrunk in relation to the price increases, and people can afford less.
Can't afford it? Give them more loan time!
It's another trap.
And we keep falling into them.
Taraz
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I am fine with Trump pumping housing prices as most of my net worth is in real estate :) Having said that I don't think extending 30 year mortgage to fifty years is in the best interest of the borrowers. As always he is selling stinky fish to the stupid :)
Did you hear the latest from him? He is saying that US is so wealthy now because of his tariffs that he will do $2,000 tariff rebates... OMG, another hand out to the stupid and they will love him for it...
So is his, isn't it? :D
Yeah, I did hear about the handouts - while the debt keeps climbing.
dont buy it if you can't afford it... if you need to finance it... make it work... no point buying a 12k trailer and it costing you 30k over 30 years, unless you have a way to make income off said trailer... or you use the money you would spend on said trailer to get somoething better for your life and business... i agree... loan time is a trap from the banks to make THEM money... not you.... :--)
If you can make income from it, that is fine - which is why the investors will use it to create income from rents, and then push the prices up for owner-occupier buyers and renters alike.
yep, sneaky banks, it sounds like they are "doing you a favour" they are really not at all...
Ridiculous. Reminds me of my friends who bought a new trailer and they ended up taking out a fifteen year loan for it. I about fell out of my chair when they told me that. I feel like a five year loan is way too long. Never mind a fifteen year loan on something like that. Anything higher than 30 years on a mortgage is a non starter for me. In fact, if I ever get another one, I'd rather it be 20 years or less.
I was going to mention, "imagine having a 20 year car loan on a car that only has value for 10 years". It is crazy.
Totally crazy!
This is a reminder that the well-being of the society is not a priority for politicians. I think they take the best of the resources that we possess and throw the crumbs to us.
Don't be surprised Trump may have made this housing move just to profit from the real estate sector. Or it might be a favour he's rendering to a friend who stands to profit from it who might have financed his campaign efforts. Whatever, they are just in positions of power to improve their financial and social standings.
I think the belief of these world leaders is that it's easier to keep the masses of the people under control if you can keep them poor and hungry, barely surviving. I imagine what world of trouble will ensue for the rulers should a good bunch of the masses become financially free. That's their number one fear.
Trump does nothing that doesn't benefit him on some way.
It is to a point. Until they are so hungry they become incredibly violent.
Loans have become such a nasty tool to propagate the current system, keep it alive artificially. In personal experience, 80% of the loans taken by friends (not family, we check loans very thoroughly) don't make sense. They're for consumerism, bad business ideas or other expenses that will not add, but subtract value from their lives.
The max here in Ecuador is 30 years. That's reasonable, but still a long time. In a culture without much interest in forward thinking (and seemingly no capacity to do so), 30 years might be like 105 years. Money now, worry later, whatever.
It's not about the idea anymore. Probably never has been? About the business it could spark. The future a loan could give, adding to the whole society. No matter how bad the idea, how unnecessary the expense - if there's a slight chance of getting the money back with interest, here's your loan.
It reminds me a lot of movies of gamblers and the loan sharks. It's not that much different in the legalized system. You might not get your legs broken or be killed, but you'll get stripped of everything, never to recover. Economic legs broken, financials killed.
And it keeps people paying. No one wants the stigma of being an economic outcast in a society that only values financial ability.
Hmm, honestly, the kind of policy like you said will only make things worse while it looks like they are doing the citizen a favour of getting to be a house owner it is going to backfire as the children are likely to inherit debt upon debt without any way out which is sad.
It is suck as it seems the bank will only get to milk people the more, and the rich would certainly get riches. Merely looking at it, Trump is a businessman and will always do something that favour his kind. This is just my opinion.
People will agree to all kinds of things when they think that they will get a little bit more money in their pocket.
A 100 year housing loan will probably never make sense to me
Nope. I have friends who thought it was a good idea at the time - but not anymore.
Credit cards and home loans are things that trap people in a tight debt trap. It is common for people to get them at a higher price when they are given big concessions for loans. In our country, the repayment period for home loans is a maximum of 15 years. Only a few government commercial banks have given a maximum of 25 years as the repayment period under strict loan conditions. Therefore, many people do not take up loans because the monthly loan amount has to be paid in the relevant month. Therefore, there is no money left to spend on additional needs. A minority who do not have a proper understanding of this, pursue additional needs and fall into the debt trap.
When loans become easy, it means that everyone gets into debt. Because then people think that we don't have to repay the loan every month. I think that people get into more debt. Moreover, when loans become easy and people take loans very easily, people try to take huge loans and as a result, the prices of housing projects increase a lot.
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STOPI think extending loan terms might seem like a good idea at first; however, it actually leads to more borrowing and ends up driving housing prices even higher as well as hyperinflation.
This sounds like an episode from Mentalist. Many(most?) of them had red in the title.
Also I heard that in Lithuania people are gonna need to have less money as a initial payment on the house. But of course in that case they will pay more overall. I checked the price of the camera I asked you about. In one shop. it costs 719,65 € but if I would pay in instalments over a year it would cost 775, 81 € ...I will never understand why some people think that this a good deal...
yup.. inflation kills..