ziggy29 said:
Another thing I'd say is this -- it's said that among other things, low interest rates are being used to encourage home buying to put a "floor" on housing prices by keeping mortgage rates very low and payments much more affordable.
But how does it help the housing market when Bernanke effectively tells people thinking about buying a home, "No rush to buy, folks -- you'll still have this window of opportunity for 3 more years."
Cutting the low rates short wouldn't speed up the housing slide to the bottom.
The tax rebates for home buying gave a slight bump, but then the slide continued down afterward. There just aren't enough available buyers to suck up the available homes.
The interest rates being low are helping keep prices up, but once the rates go up, prices will drop even more.
Even if you set a deadline of, say, six months or a year on low rates, the ones who are able to buy based on needing a down payment and decent credit score already are.
I'm of the opinion that we should just bite the bullet, rather than kick the can down the road (if you'll excuse me mixing my metaphors), but by keeping rates low it gives several years for buyers to get short sales off their record and repurchase at affordable rates and prices.
I don't think that many are sitting on the sidelines waiting to purchase simply because the rates will be low for awhile. "Oh hey, rates are low now, but let's wait until they're going up!"
Like I said, I think we should just let it crash to the bottom so recovery can start. But keeping rates low to keep them affordable isn't as crazy as your scenario presents it, IMO.