I'm only wondering how low mortgage interest rates contributed to anything? I'm not a financial guy, just a person that lives debt free and has for many years.
With perfect credit, my first home was purchased at 18.5% interest rate. With the interest payments running way ahead of the principal payments, one could barely afford to own much more than a hovel when starting out in the civilian job market. By making a double payment, one on the principal and the other on the principle and interest, I got it down pretty quick.
http://www.bankrate.com/finance/mortgages/history-of-mortgage-interest-rates.aspx
With 15 year notes now running in the 2.75% range, how is that a bad thing? How does making housing affordable a bad thing?
It seems to me the bubble was caused by predatory lending practices that put people into homes they couldn't afford. Banks and the Government oversight agencies should have reined that in, but didn't.
If I remember right, they were the actual people causing the whole bubble?
Artificially keeping interest rates low helped fuel the sub-prime bubble, allowing people who shouldn't really qualify for home loans (in part by pressure from big gov't pushing the dream of home ownership for all) to get mortgages. My home mortgage payment has gone up almost 30% in the 6 years I've owned my home.. and that's with a fixed-rate... it's actually my homeowner's insurance that's driven the increase. But it illustrates the danger in pushing sub-prime mortgages and allowing people who are borderline or dangerous credit risks to become homeowners with no "cushion" in their monthly income to allow for changing interest or insurance rates.
<edit> And my damn mortgage has sold three times to different companies. aside from the 2 or 3 times it sold in the first couple of months after we closed.