I live in south Florida ,where the homes are ridiculously priced!! Aren't the banks making the same money when they were getting 9 and 10 % for a house that's was worth 100-200,000. As they are for 400,000 house with a 6% interest rate?? If the houses keep rising why do they Need to raise the interest rates also? Won't more homes sell with lower interest rates? People can't afford a 400,000 house @ 9% I know the market isn't that high everywhere ,but couldn't they have different interest rates for different areas?


Rocky

No, they can't.

Where do banks get all this money to loan you?

The answer, from people who put their money into savings accounts.

Well, if they have to pay an interest rate of 4 or 5% to those that invest the money with them, they need to get an interest rate of about 9% on a mortgage to make a substantial profit.

When interest rates were 2 or 3% on savings, interest rates on mortgages were lower.

However, to help curb inflation, etc, the Federal Reserve will raise interest rates, therefore mortgage rates rise, therefore less people stop spending.

And if interest rates were different in different parts of the country, then everyone would invest their money in the bank that is giving them the highest interest rate and those who want the low mortgage can't get it since the low mortgage banks no longer have the money to give!

Florida housing is high, as is other parts of the country. The housing market boom is slowing down, and in some places it's even expected to start going down (e.g. Las Vegas in 2006 or 2007, can't remember)

If you are living in an area where you can't afford to buy a house, then just rent. Or move to another area. Or save up until you can afford to buy it.

Unfortunately life isn't fair.