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The significance of stability in interest rates and property values before the 1930s economic collapse is critical in understanding the historical context of the Interest-Only Mortgage model. Before the Great Depression, the economic environment allowed lenders to offer these mortgages with a degree of confidence. Property values were expected to either remain stable or appreciate, and the interest rates were stable, which made it feasible for lenders to create products where borrowers could pay only interest for an initial period.
This model relied heavily on the assumption that property values would continue to increase, allowing borrowers to refinance or sell their homes for a profit before needing to start paying down principal. However, once the economy collapsed and both interest rates and property values became volatile, the viability of the Interest-Only Mortgage model came into question. As a result, it was within the context of this prior stability that lenders were able to devise such agreements, making the historical perspective of interest rate and property value stability a vital aspect of understanding the significance of the model's changes post-1930s.
The other options do not directly relate to the foundational changes experienced by the lenders regarding the Interest-Only Mortgage. Increased fees for early repayment, mandatory insurance for every loan, and the structure of fixed-term loans with no flexibility represent