Low rates encouraged excess risk-taking through a self-reinforcing feedback loop: rising housing prices gave borrowers incentive to keep paying and not default, which misled underwriters into thinking investments were less risky, so more investments were made on that assumption — a process that reversed when prices leveled off and delinquencies and foreclosures rose.
causalpending
Speaker
John TaylorEvidence Quote
“low rates themselves encourage some excess risk-taking... those high inflation rates for housing would give people more incentive to make their payments... so that would mislead if you like underwriters into thinking these are good investments less risky than you'd think... of course when housing prices started to level off and actually fall that all reversed”
Created: 6/15/2026, 9:20:12 AM
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