(Disclosure: I fully support all reasonable measures to make housing more affordable)
On the contrary, government backed mortgages provide an opportunity for buyers to become homeowners competing against institutional investors and cash buyers.
They are a subsidy, but that’s not a bad thing if desired policy is to encourage home ownership. I would very much like to see your data that these mortgages are what cause unaffordable housing, versus lack of supply, institutional investors buying up residential real estate, restrictive zoning, and most recently, a real estate asset bubble due to Federal Reserve zero interest rate monetary policy (which caused real estate prices to skyrocket when money is cheap).
> Would you wanted to underwrite a 30 year loan for 500k a couple years ago at 3%, knowing that rate could only go higher?
Tangentially, the bond market seems to be a peace with 30 year mortgage terms, probably because the life of a 30 year fixed term mortgage is typically under a decade (while being amortized over said 30 years).
On the one hand, if the government helps to lower mortgage interest rates, which they have, then they are acting to increase the price of housing some amount, given the laws of supply and demand. In Canada and the UK people will have to refinance every few years in this rising interest rate environment, which will put downward pressure on housing prices.
On the other hand I agree with what you said about institutional investors being difficult to compete with. This is the downside of housing being prioritized as an investment. Investors know that supply is constricted, so they are taking advantage. I would address this by taxing investors and making it easier to increase supply, not subsidies that inflating the price for everyone trying to put a roof over their head.
> the bond market seems to be a peace with 30 year mortgage terms
I'd be pretty easy-going about a government backed loan, too. That's a lot less risk. That means the interest rates are lower than they would be if the government was not guaranteeing them.
On the contrary, government backed mortgages provide an opportunity for buyers to become homeowners competing against institutional investors and cash buyers.
They are a subsidy, but that’s not a bad thing if desired policy is to encourage home ownership. I would very much like to see your data that these mortgages are what cause unaffordable housing, versus lack of supply, institutional investors buying up residential real estate, restrictive zoning, and most recently, a real estate asset bubble due to Federal Reserve zero interest rate monetary policy (which caused real estate prices to skyrocket when money is cheap).
> Would you wanted to underwrite a 30 year loan for 500k a couple years ago at 3%, knowing that rate could only go higher?
Tangentially, the bond market seems to be a peace with 30 year mortgage terms, probably because the life of a 30 year fixed term mortgage is typically under a decade (while being amortized over said 30 years).