Textbook Problem

Explain how lower lending standards and lower interest rates can lead to higher house prices.

To determine

Lower lending standards and higher housing prices.

Explanation of Solution

When the lending rates are low and the interest rates are also lower it implies that loans or mortgages are easier to access at a cheaper cost. This will lead to an increase in the demand for housing as the housing financing can be easily availed. This increase in demand would result in a higher price for housing as housing is a limited resource.