[denimnerd42]

just makes the prices higher... you qualify for a house based on ratio of income to payment. so the demand is heavily influenced by the type of financing available..

Other than natural demand, Australia has a high real estate market due to the tax and a superannuation/pension distortions. Should try to fix those first. (probably impossible)

[cortesoft]

And as I pointed out in a sibling comment, it can lock you into your house if interest rates go up. We can’t afford to sell our house because the extra interest costs would increase our monthly payment by 50% even if the house cost the exact same as our current one.

[smeej]

I still don't understand how this means you "can't afford to sell your house." It just means you can't afford to buy another house at the same price as the one you have now. That's a different problem, and one that doesn't actually have anything to do with the interest rate on your existing mortgage. You can't afford to buy a house today at the same price that you could on the date you closed on your current house, but that's true regardless of the interest rate on the current house.

Let's put a number on it. Since the article uses $400k as a reference point, let's use that. You could afford to buy a $400k house back when you bought your current house. You cannot afford to buy a $400k house today. That would be true whether or not you had purchased your current house, and regardless of the interest rate on its mortgage if you had.

You only "can't afford to sell your house" if you're underwater on the mortgage and can't come up with the money to sell it.

[selcuka]

You are locked in because currently you have a great deal that you don't want to lose. If you were in Australia, you would already be paying that higher interest rate for your current house. I don't see how that's a downside.

[hollerith]

That's very similar to not being able to change jobs because you cannot find another job that pay even 66.6% as well as your current one.