this post was submitted on 20 Aug 2023
706 points (96.8% liked)
Asklemmy
43979 readers
650 users here now
A loosely moderated place to ask open-ended questions
If your post meets the following criteria, it's welcome here!
- Open-ended question
- Not offensive: at this point, we do not have the bandwidth to moderate overtly political discussions. Assume best intent and be excellent to each other.
- Not regarding using or support for Lemmy: context, see the list of support communities and tools for finding communities below
- Not ad nauseam inducing: please make sure it is a question that would be new to most members
- An actual topic of discussion
Looking for support?
Looking for a community?
- Lemmyverse: community search
- sub.rehab: maps old subreddits to fediverse options, marks official as such
- !lemmy411@lemmy.ca: a community for finding communities
~Icon~ ~by~ ~@Double_A@discuss.tchncs.de~
founded 5 years ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
Mortgages needing to be renewed every 5 years so that banks can jack the the interest rate. Cap residential mortgages at 25 years max and 2% interest for the duration.
Many people lock in interest rates for the life of the loan. Most often 30 years for mortgage loans. You don’t have to renew a mortgage’s interest rate unless you get an adjustable rate one.
This is the main reason why mortgage applications are down significantly right now. People with super low interest rates don’t want to move because they’d have to get a new loan to do so, and interest rates are much higher now. If they stay and they have a fixed-rate loan, nothing changes.
The user you are responding to has an account on a .ca domain. In Canada (as well as UK) it is more common for the rate to only be locked in for 5 years.
Well that's lame... You guys should do something about that, as a US home owner, having a fixed rate mortgage is one of the best parts about owning vs renting.
As a US non-homeowner, I'm not sure what you think I should do about it.
I think it's pretty clear I was talking about the folks you're referring to... not you specifically if you're not in that group... but fair enough.
Why would any institution give you a mortgage on those terms?
Because it doesn’t matter the company. A bank creates money if you apply for credit. It just have to have a fraction - say 3% - real money to store at a central bank account. Then they literally type the numbers on your account. Money created!
So, for a bank, it doesn’t matter if you apply for 5.10.20 years. They get the interests anyway. May be there is some weird financial acrobatic behind the 5 years target. However, here in Germany it’s pretty common to get a 20 years credit.
The hell are you on about, reserve banks can create money, but a retail bank borrows it from someone else and loans it to you.
And if that "somewhere else" can get a better deal elsewhere, they won't loan it to the bank in the first place.
No retail banks create money while they grant a loan - it’s called book money creation https://www.geld-und-geldpolitik.de/en/banks-and-book-money-chapter-3.html#nav-vier If you wanna get rich, start a bank
What they mean by that is if there is a newly created bank with no money in it, and you deposit 100 of whatever currency, then I come in and withdraw 80, which I will use to pay for the creation of a bakery. Then I give those money to you, after you have built the bakery for me. Then you go back and deposit those 80 back to the bank. Then the cycle continues: I take out another 80, for example, to pay for initial products, I pay them to Person 3, who deposits them in the bank. The bank just turned 180 into 260. If, at that moment, I, as the bakery owner, decide to refinance my loan, I can get 60 from the bank. If then we get you, with a balance of 160, and Person 3, with a balance of 80, to withdraw their deposits, what do we get? Think about it: the bank only had 100 in its reserves from the initial deposit, and all the other deposits were money that the bank had loaned out, so while you had 100 deposited, then 80, you technically have 180 in your bank account, but there's only 100 actual money in the system.
What the fuck have you been smoking?
You know what? Let me simplify if for you:
Person A deposits $100 to the Bank
Person A's account is worth $100. The Bank has $100 in its reserves.
Person B takes out a loan of $80 from the Bank.
The Bank now has only $20 in its reserves.
Person B pays the $80 to Person A for a service
Person A deposits the $80 to the Bank.
Person A's account is worth $180.
The Bank now has $100 ($80 deposit + $20 left from earlier) in its reserves.
2 days later, nothing's changed, except Person A needs some extra money quickly, so they go and try to withdraw the $180 in their account. The Bank only has $100 in its reserves.
That's why we have a "fractional reserve" system in place pretty much everywhere.
And besides, they haven't created that money, as the first person has a balance of -80.