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http://ochousingnews.com/blog/will-rising-wages-offset-impact-rising-mortgage-rates/

As mortgage interest rates go up, affordability declines. Only rising wages can offset the effect of rising mortgage rates. Will it be enough?

When mortgage interest rates finally begin to rise up to historic norms, a move anticipated by nearly everyone, home affordability will suffer because borrowers will need to spend more money to pay their mortgages. Since most borrowers maximize their loan amounts, the only way to overcome the problem of rising mortgage rates is for borrowers to make more money. With high unemployment and low labor participation rates, employers don’t need to increase pay to fill new jobs, and employees lack the leverage to force employers to pay more.

But what if rising interest rates across the lending spectrum causes wages to rise? Will rising interest rates finally cull unproductive businesses from the economy and allow the best and most productive workers to demand pay increases? Will rising rates actually have the opposite effect of what many believe and actually cause incomes to rise?

Source: http://ochousingnews.com/blog/will-rising-wages-offset-impact-rising-mortgage-rates/#ixzz3A5ceUSEE

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