Can someone who understands basic economy answer this?

[FourScore]

I'm sure this question will sound naive and uneducated to those who understand the intricasies of the economic world. Hell, it probably even sounds naive to those who understand the basics. But, please, don't be cruel.

I am wondering why the government doesn't put a cap on home interest rates. That's it. Why don't they?

Thanks.

[Scuba]

1. Not a question of economics, but of politics.....

... whether or not it's a good idea.

[jpak]

2. Mortgage interest rates are at historic all-time lows - no gov't cap required

yup

[vets74]

17. He wants to cap how low they can go ???

Whatever.

[yella_dawg]

3. Economic controls have never worked well in the US.

Or anywhere else as far as I know. Its pretty much the same idea as prohibition as a social control. No matter how good it sounds, the unintended consequences dominate the situation.

[snappyturtle]

4. I'm equally naive however my answer is, why would they? Interest rates

are historically low for the few that can get loans. I'd rather see the gov't cap drug cost increases and insurance premium upticks that never seem to end. imho

[Marrah_G]

5. The mortgage rates are low, its the credit card rates that are out of control

[Arctic Dave]

6. Can't rec your statement enough.

CC have gone from being a convient way to pay for items to a rackeet for banks to shakedown customers.

[Marrah_G]

11. once upon a time these rates would have been illegal!

[RKP5637]

15. That and payday loans. Years ago those

raking in cash from payday loans would be sitting in jail by now.

[Codeine]

7. Is it even possible to go lower? nt

[dmosh42]

16. Yes, The feds loan the banks at 0%, or very low rates. Then the banks...

are loaning to the public or business at over 4% or more, which is a huge profit when you think of hundreds of thousands of loans. But mostly they invest it back into treasury notes which are guaranteed trillions for the banks, and that's the people's currency they're manipulating. All theft legalized by our government!

[AngryAmish]

8. It is a price control

Interest is the price of lending someone money. When you control the price of something you get less of it.

There could be $1 a gallon gas in the US. But if they are willing to pay $2 a gallon in Canada or Europe or China, how much gas would be sold in America?

So if interest rates were 1% nobody would lend (since the historic rate of inflation is greater than 1%). Plus the possibility of default.

[Billypenn]

9. That should have happened a long time ago

when it actually would have done some good. Before balloon rates skyrocketed in 07.

[thecrow]

12. I remember our first mortgage in 1979

when the interest rate was 17 or 18%

[rugger1869]

10. It's a manufactured crisis

http://www.youtube.com/watch?v=qOP2V_np2c0

[FormerDittoHead]

13. They should put a limit on CREDIT CARD rates - 29% should be illegal. n/t

[Scuba]

14. And the reason they don't is that they are bribed to not do so, regardless of what is best. n/t

[uponit7771]

18. ANSWER: Because banks would stop lending when 10 and 15yr T rate goes up.

30yr and 15yr interest rates are based of the T bill or Treasury bill, when wall street gets nervous (or any street on the planet) they pile into the T bill driving down rates. During 2009 for instance there were so much big money piling into T bills the US Government could actually start charging to keep big institutional money (negative returns) because the US Dollar is so safe.

When people aren't nervous they start piling into riskier investments like equities (stocks, exchanges, derivatives) and pulling out of the 10yr and 15yr T bills, that drives rates up. When the banks see this they have to start charging more interest on your home loans cause that's what they marginal rate is based off of.

If the rates are capped banks stop lending cause it'll take an act of congress to raise those caps again and they fluctuate daily based on how much a bank can buy blocks of paper (or money).

[customerserviceguy]

19. Government price controls only work (if at all) in the short run

If you legally capped mortgage interest rates at, say, 5%, once the cost of money hit that level, there would be absolutely no more home mortgage lending. Period.

You think it's bad now? Well, with a high credit score and 20% equity, you can get a loan now. If the banksters have to someday pay anywhere from 4% and on up on savings deposits, and there's a 5% interest rate cap, there will be absolutely no new or refinanced loans for anyone.