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Comment by red369 | Hacker News Reader

I much prefer the system the US, where you know your rate for longer. Some other countries, I think the Netherlands is one, also let you fix for longer than 5 years. But why are you, and other people in your position, screwed if the prices return to affordability? High Loan-To-Value ratio so if the prices fall, the bank would force a sale?

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If they put 1M into a house, then sell it and buy a 500k bungalow at retirement age, that unlocks 500k living/care money.

If they put 1M into a house, prices fall, they sell it for 100k and buy a bungalow for 50k, that unlocks only 50k to live on.

They lose decades of saving/investment money even though they can still sidestep one house to another.

I fully take your point, but I would point out, if housing prices drop 90% across the board, that would cause such an immense deflationary shock to the entire economy that $50k would go further than one would think.

So who will be buying all the potatoes that nobody can afford any more?

Money is made up numbers. Food is real, energy is real, houses are real. The numbers are literally just numbers.

Germany here, I have a fixed rate for 30 years.

Fixed rate for the full duration is also standard in France. People only refinance if the new rates are advantageous (and they find a bank which accepts). Variable rates for mortgage are virtually unheard of.

I would assume it would be because the poster would find themselves in negative equity (depending on how much was left to repay on the mortgage) with all the potential pitfalls that come with it, such as if you want to borrow further money against the value of the property or if you want to sell up and move.

Let's say you buy a house at 500K with a 400K mortgage. House prices fall 50%, you owe 400K on a 250K house. Banks would repossess as the loan value can't be guaranteed by the asset. Separately, you could default on the loan if laws allow it, losing much of your wealth and making it impossible for you to get a loan for the 150K to move to another house. You could keep paying the loan, spending many years of income for exactly nothing in return. People tend to buy another house immediately, so there isn't that much "freed" money. So either banks lose a huge lot of money, or people do. Either way, massive financial crisis. That's an extreme case, adjust for lower fluctuations. I can be, and probably am, completely wrong about this.

In which country can Banks reposess if market value falls? In Germany that risk is 100% on the bank. No reprocessing without you failing to pay anyway.

I misspoke - you would not be able to remortgage and would need to repay the loan when the term expires, or be repossessed. In the UK, most people are on a 2 or 5 years fixed-rate mortgage, after which you don't need to remortgage but really want to, because the variable rate is typically a lot more expensive - so you're throwing even more money into the hole.

Ah, you are right. That would be hard if you couldn't remortgage.

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