[denimnerd42]

just makes the prices higher... you qualify for a house based on ratio of income to payment. so the demand is heavily influenced by the type of financing available..

Other than natural demand, Australia has a high real estate market due to the tax and a superannuation/pension distortions. Should try to fix those first. (probably impossible)

[cortesoft]

And as I pointed out in a sibling comment, it can lock you into your house if interest rates go up. We can’t afford to sell our house because the extra interest costs would increase our monthly payment by 50% even if the house cost the exact same as our current one.

[smeej]

I still don't understand how this means you "can't afford to sell your house." It just means you can't afford to buy another house at the same price as the one you have now. That's a different problem, and one that doesn't actually have anything to do with the interest rate on your existing mortgage. You can't afford to buy a house today at the same price that you could on the date you closed on your current house, but that's true regardless of the interest rate on the current house.

Let's put a number on it. Since the article uses $400k as a reference point, let's use that. You could afford to buy a $400k house back when you bought your current house. You cannot afford to buy a $400k house today. That would be true whether or not you had purchased your current house, and regardless of the interest rate on its mortgage if you had.

You only "can't afford to sell your house" if you're underwater on the mortgage and can't come up with the money to sell it.

[cortesoft]

Yes, what you say is technically correct.

We feel trapped because we would have to massively downgrade to move. Obviously, we COULD do that, but we don't want to.

You are right, we also couldn't afford to buy our current house if we currently didn't own a home, either. I am arguing that the fixed thirty year mortgages artificially drives up prices, which means that you are stuck and can't move whenever interest rates are high.

If we didn't have the fixed thirty year mortgages, housing prices would have never gotten so high, and buying and selling houses would be a lot easier, and people could move to where they want to be much easier.

[smeej]

Fixed-rate 30-year mortgages have been around for generations now. They're long since priced into the market.

Whether any specific person actually thinks through whether spending as much money as the bank will lend is prudent, instead of buying a house they can actually afford, saving the money, and upgrading later, is a different question. But it's not fair to blame the mortgage itself.

[denimnerd42]

it's too expensive to move with closing costs and realtor fees :( It's almost always better to buy the most expensive house you can if you you still have a way to increase your earning potential in your career. if you could move without a 6% fee and $xx,xxx financial fees it would definitely be better for everyone overall except the industries who have inserted themselves into these transactions

[smeej]

In the vast majority of U.S. markets, it's almost always better to buy--or even rent--the cheapest house that meets your space and safety needs and invest the rest in index funds.

Anyone who ends up with their primary residence as their "biggest investment" has been a piss poor investor.

[selcuka]

You are locked in because currently you have a great deal that you don't want to lose. If you were in Australia, you would already be paying that higher interest rate for your current house. I don't see how that's a downside.

[hollerith]

That's very similar to not being able to change jobs because you cannot find another job that pay even 66.6% as well as your current one.