I doubt low interest rates help buyers all that much. If there are 3 properties on the market and 4 buyers, it doesn't matter what interest rates are, the 3 highest-earning buyers are going to get the houses and one will miss out. The amount of money borrowed might go up and down, but there is a physical balance equation that must be satisfied which doesn't care about the financial situation.
In theory, low interest rates will reallocate resources from other sectors of the economy to housing, causing more to be built. In practice I don't know how big a factor this is though - I'm used to there being regulatory restrictions that prevent new housing being built in high-demand areas. But that might be an Australia thing. Regardless it'd lag interest rate changes by a few years because it takes time to organise new construction.
Yeah people are constrained by how much they can pay off each month. Either that’s higher prices with lower interest or lower prices with higher interest.
The drove up prices, making the down payment side harder. Higher interest rates should bring down the sales price, making down payments go further, but we're only halfway seeing that. My thinking is because the shortage masks that, but people married to their underwater 3% fixed-rate mortgages also does (for now). Ironically, this seems to be driving homebuilders to build more.
In theory, low interest rates will reallocate resources from other sectors of the economy to housing, causing more to be built. In practice I don't know how big a factor this is though - I'm used to there being regulatory restrictions that prevent new housing being built in high-demand areas. But that might be an Australia thing. Regardless it'd lag interest rate changes by a few years because it takes time to organise new construction.