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Interest Rates are Low but are Mortgages Cheap?
Author(s) -
Booth Philip,
Wood Geoffrey E.
Publication year - 2000
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/1468-0270.00257
Subject(s) - interest rate , inflation (cosmology) , debt , economics , monetary economics , nominal interest rate , illusion , face (sociological concept) , real interest rate , business , finance , psychology , sociology , social science , physics , neuroscience , theoretical physics
It is claimed that mortgages are at present cheap so that people can afford higher mortgages, and hence more expensive houses, than previously. But that claim is based on money illusion. Nominal interest rates are at present ‘low’ primarily because of relatively low inflation. People contemplating mortgages should look at real values or they may face an unexpectedly large debt burden in the future.