> For those who bought now (me!) at high sticker prices and low interest rates, the mechanics don’t work in our favor. Interest rates are only likely to go up, which doesn’t allow refinancing at a cheaper rate. At the same time, (inflation-adjusted) sticker prices will go down.
This ignores the fact that, in some countries at least (e.g. Denmark), you reduce your debt if you refinance at a higher interest rate.
For example, if you financed your house with a $200,000 2% fixed-rate 30 year Realkredit loan, and the rate of interest increases to 4%, then you can refinance you existing mortgage at 4% but now you only owe $100,000.
This is how bonds work in general: a doubling of the rate of interest halves the bond price, and a halving of the rate of interest doubles the bond price.
This ignores the fact that, in some countries at least (e.g. Denmark), you reduce your debt if you refinance at a higher interest rate.
For example, if you financed your house with a $200,000 2% fixed-rate 30 year Realkredit loan, and the rate of interest increases to 4%, then you can refinance you existing mortgage at 4% but now you only owe $100,000.
This is how bonds work in general: a doubling of the rate of interest halves the bond price, and a halving of the rate of interest doubles the bond price.