Question

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

a. Banks want to decrease incentives to buyers when demand is high.
b. When the demand for mortgages increases, lenders can increase the cost of borrowing money.
c. Interest rates do not move in response to consumers’ actions.
d. When demand is high, interest rates decrease.

Answer 1

"b. When the demand for mortgages increases, lenders can increase the cost of borrowing money" would be the best option, since there are still enough people willing to spend that money at higher interest rates.