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Comment by alexfromapex | Hacker News Reader

I think civilization needs to take a step back and reflect on why we're making debt/credit a necessity to have basic needs like shelter.

Also, why are governments not creating sensible upper limits on lending and interest rates? For instance, if I can afford to purchase the raw materials and build a house myself in 10 years with my own two hands, assuming I'm not working a job, then why is a bank allowed to extend interest over 5 times that timespan and make me pay e.g. 1000% of the raw materials price in profit to them? They are preying on peoples' basic need to have a roof over their head.

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The bank isn't selling you the house, the current owner is.

If you can afford to pay the current owner, you don't need a loan. I don't see why the bank is the villain here, "preying" on basic needs. In your ethical framework, that's the current owner, who refuses to sell you his home at a massive loss so that you won't need a loan.

Credit being normalized increases demand which increases prices, which forces people to take a loan (ad infinitum, one of the reasons real estate is always in a bubble)

...because not everyone has cash to buy the largest investment of their life...?

loans/credit are very useful...

profit is great, as long as there's competition, right?

> the largest investment of their life

That's the problem. Housing has been regulatory captured. Abundant housing contruction due to a free market would allow people to live in dwellings at a slim margin above mass construction. Houston is still $270k homes while adding 20k people a year.

This is an Econ 110 answer to an Econ 473 problem.

Go on?

What competition? All new construction undergoes extensive red tape from localities.

If your talking loans, nearly all mortgages are conventional mortgages (or a similar defined breed defined by the feds). When you are loan shopping, your really just shopping for a broker, not a loan provider. That's going to be Sallie Mae or Freddie Mac, who in turn are backed the Federal Reaerves. That's why you'll receive a letter pretty quickly that your loan has been sold to one those two.

Your not even shopping for a loan servicer - as that can be sold and changed almost immediately too, or is already subtracted out to Mr. Cooper or someone else.

There is very little competition since it's all defined by the feds already. It's super regulated.

> There is very little competition

Then that's not really capitalism.

You can buy a house with a ten year mortgage. You'd pay roughly 20% more than the value of the home before it was paid off.

https://www.bankrate.com/mortgages/10-year-mortgage-rates/?m...

You can multiply APR x years of loan term. You’d pay 5.1% APR x 10 or 51%. With the shorter term the payments would be very high each month.

True, though that only applies to the balance. The best example I found had an APR just under 4% (most are a bit more than that), and with 20% down, that ends up being about 32% over (higher than my estimate, but I was napkin-mathing)

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