Question

Why do interest rates on home mortgages increase when demand for housing increases?

(1 point)
Responses

Banks look for ways to decrease incentives to buyers as much as possible when demand is high.
Banks look for ways to decrease incentives to buyers as much as possible when demand is high.

When the demand for mortgages increases, lenders can increase the cost of borrowing money.
When the demand for mortgages increases, lenders can increase the cost of borrowing money.

Interest rates on home mortgages do not move in response to consumers’ actions.
Interest rates on home mortgages do not move in response to consumers’ actions.

When demand is high, interest rates decrease on most goods and services, including houses.

Answer 1

[AI-generated answer — Bot GPT 3.5]

When the demand for housing increases, lenders may increase interest rates on home mortgages because they can capitalize on the high demand and charge more for borrowing money. This is a way for lenders to maximize profits and potentially offset the higher risk associated with lending during a time of high demand.