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Comment by mywittyname | Hacker News Reader

Banks love mortgages because they are easy, safe ways to earn a bit more than the federal rate.

Wealthy consumers love mortgages because it's a cheap way to leverage a huge asset for market-rate returns.

Normal consumers love mortgages because it allows them to buy a house.

Good luck taking that away.

Additionally, while access to credit raises housing prices, there's no guarantee that removing access to that credit will in any way make housing more affordable for moderate- or low-income people. More people would be forced to rent and it's possible that the wealthy apartment owners will engage in rent seeking and rents will just raise to match or exceed the cost of a mortgage.

That will rob lower income people of their biggest opportunity for wealth creation (housing appreciation) and increase wealth inequality.

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But you're ignoring the fact that people are already being priced out of the housing market. The market only continues to gain steam while the next generation can reasonably shoulder the burden being placed on them by the previous. Otherwise those assets are going to deprecate. Credit allowed a handful of people to become incredibly wealthy by becoming rent seekers, while most people didn't realize they had the opportunity. The general consensus seems to be "Tough shit if you weren't born in the 60's - 70's". I don't see that ending well for the economy as a whole.

Yes. Here in the UK, I have a lot of sympathy with the view that Corbyn's Labour would deliver debt-funded jam today by dumping the burden onto future taxpayers, but the Conservatives have been doing the exact same thing for their own clients, via property inflation.

"Land by its nature is scarce. A site in Mayfair cannot be reproduced like a pair of shoes. The monopoly rent it commands plays no productive role. It acts as a private tax on the productive economy. The question has always been what can be done about it." [1]

I posted that quote because it's the reference I found most speedily to the idea that high land prices impose private (i.e. paid into the private sector) taxation, rather than public. You didn't make the distinction between public vs private taxation in your comment and I thought it should be made.

Public taxation is also involved of course, e.g. when governments need to bail out the banking system; Help to Buy in the UK; etc.

[1] https://blog.p2pfoundation.net/how-land-property-is-tied-to-...

> high land prices impose private (i.e. paid into the private sector) taxation, rather than public

Agreed, though I'm not sure that's much consolation to the ones paying it. With public taxation at least you can hope you're helping to fund something useful.

Indeed!

BTW, you mentioned reservations about possible overspending by Corbyn's Labour. I'm encouraged however by the noises they're making about productivity, e.g. in a recent report:

"The report’s guiding idea is to encourage finance to flow towards productive investment rather than speculation in property. This reflects an old complaint about the City of London: it is a global entrepot with little interest in promoting productive investment in the UK." [1]

And here is a very good primer on the important distinction between productive and unproductive credit. [2]

[1] https://www.ft.com/content/c59c189e-85b8-11e8-a29d-73e3d4545...

[2] https://youtu.be/N-FDdHj7rPk

People will always be priced out of the housing market. Adam Smith observed in the wealth of the nations that once people have the basics housing tends to eat the rest of their income. You can afford to buy/rent closer to where you want to live, or you can afford to buy/rent a bigger place. Since you already have enough for the basics most people find that better housing improves their quality of life.

I have noticed in recent years that improving without changing location or size is also often done as well. A cheap laminate counter is replaced by granite - no change functionally or in size, just an aesthetic change.

Mortgages per se aren't the problem; low rates and high LTV are the problem.

I agree that changing this is politically difficult, and it's downright depressing to see discussion threads on the topic filled wall-to-wall with turkeys demanding more Christmas, but there are limits to how far credit bubbles can take you, and there are signs we may finally be getting there.

Big mortgages would rapidly become a lot less popular if prices weren't a one-way bet guaranteed by the government.

Sorry to post this link at you again, but the problem is a high ratio of financial credit to productive credit: https://youtu.be/N-FDdHj7rPk

Low rates, high LTV, and government guarantees all help to keep that ratio high.

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