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The reason it hurts the middle class is that the size of their mortgages are the first to be affected by inflation, whereas their wages are among the last. Mor
by johbjo 6y ago
The reason it hurts the middle class is that the size of their mortgages are the first to be affected by inflation, whereas their wages are among the last.
Mortgage holders are stakeholders in inflation, hoping for appreciating property prices.
- thehappypm 6y agoThis makes no sense. Mortgages give you a fixed monthly price locked in at closing time. With inflation this payment has less and less real cost, and your home value goes up.
- dnautics 6y agoNot necessarily true. If you have a fixed mortgage you might be privileged.
- thehappypm 6y agoEven adjustable rate mortgages do not change the value of the principal.
- johbjo 6y agoAsset inflation is not the same as wage inflation. Consider the relative size of new mortgages to wages. Since asset prices are typically leveraged on wages (through mortgages), assets will inflate faster than wages (unless the interest rate is set to counteract this.) But inflation is only beneficial to /new/ buyers if wages inflate faster than assets. Otherwise the relative debt of all mortgage holders increases over time. Whether asset inflation is beneficial to a home owner is debatable, since all properties appreciate at the same rate. "Moving up" still means increasing the relative size of the mortgage.