SYNDICATE 5 Interest Rate and Housing

M.Ridwan - 29112555

Machadi Dhana – 29112303

M. Khadafi – 29112324

Pedro Putu Wirya – 29112565

Seto Kusparyanti – 29112306

Yuliani Dewi – 29112321

Rahdianto Maulana - 29112554

Problem Statement

During 2000 until 2005, interest rate of fixed rate mortgage had fell from 8.5% to 6%. The decreasing interest rate impacted to the price of housing.

Due to limited supply of new housing, then the housing price start to increase.

But when interest rate start to rise in 2005, then the demand of housing begin to fall, and impacted also to the price of housing

Theoretical Explanantion

Supply and demand graph

Due to the decreasing of interest rate of fixed rate mortgage, then the price of housing began to decline. Based on the graphic, if the price is decline, then the demand become higher, which lead to increasing price.

And when the interest rate start to increase, then the total price of housing become more expensive, which lead to slower demand. This eventually bring the equilibrium shift to the right, where finally the price become lower.