We've been in a 50 year cycle of banks and institutions offering higher and higher salary multipliers to borrowers so that people can afford bigger and better houses. The demand for those houses goes up, the prices follows. Time to increase the multiplier. Rinse, repeat.
Why? Big mortgages generate big interest, far outweighing defaults.
If you're uncertain, what do you think would happen to house prices if banks suddenly limited their new loans to 5x salary?
We've been in a 50 year cycle of banks and institutions offering higher and higher salary multipliers to borrowers so that people can afford bigger and better houses. The demand for those houses goes up, the prices follows. Time to increase the multiplier. Rinse, repeat.
Why? Big mortgages generate big interest, far outweighing defaults.
If you're uncertain, what do you think would happen to house prices if banks suddenly limited their new loans to 5x salary?