5 ms·

Probably a good time to take on more debt. Even though interest rates are higher, the inflation will help you pay any new debt down quite quickly.

brailsafe 4y ago
Wouldn't the opposite be true?
spicyusername 4y ago
One thing I see that gets left out of this advice is that only works if you get a pay raise. The whole idea that inflation eats into future debt assumes that your pay inflates alongside your expenses. Inflation doesn't magically make debt cheaper, your rising salary does.
- cmrdporcupine 4y ago
  Also some of the assets you buy with your debt (say, a house) are also potentially losing value with inflation (and higher rates) in the mix.
  - funstuff007 4y ago
    but if you buy canned goods, and finance with negative interest rate debt, that's a winner.
Ralfp 4y ago
Thats only if your earnings will also grow, keeping you ahead of the curve of growing interest rates, which will not be the case for great majority of workers. I have a mortage in Poland. Base rates went from 1.5% to 6.75%. My mortage’s monthly payment went from 1792PLN to 3200 PLN (~715 USD), where 3000 PLN is interest. This is not big enough to bankrupt me, but 1000 PLN is a lot of money here and a lot of people feel the pressure so our govt enacted law that lets you move four rates in a year to the end of mortage for two years, effectively extending the mortage by 8 months, but at no base cost of mortage changing.
- pengaru 4y ago
  > I have a mortage in Poland. Base rates went from 1.5% to 6.75%. My mortage’s monthly payment went from 1792PLN to 3200 PLN (~715 USD), where 3000 PLN is interest. Are fixed-rate mortgages not the norm in Poland?
  - gimmeThaBeet 4y ago
    My understanding was that long-term fixed rate mortgages were not common at all outside of the US and like France. This is from 2010 but has some good charts. https://business.sdsu.edu/_resources/files/real-estate/research/10122_research_riha_lea_report.pdf https://business.sdsu.edu/_resources/files/real-estate/resea... Anecdotally it meshes with some things I've heard elsewhere but don't hold me to it: - Canadian mortgages are typically something like 5 years. - UK is similar, it's either variable, or fixed for something super short, like 2-3 years. - Australia same kind of boat, most are variable, I've heard the interest rates during covid temporarily reversed the trend, but same deal, they're only fixed for a few years.
    - pengaru 4y ago
      That's kind of wild, even in my teens (1990s in Illinois) it seemed to be common knowledge that variable APR mortgages were a risky/Bad Idea. I had no idea they were the norm elsewhere. The cynic in me would have assumed the US led the world in predatory style lending. This country loves handing people more than enough rope to hang themselves with, while depriving them of any relevant education beforehand.
  - Ralfp 4y ago
    No. Bank oversight comission required banks to offer fixed rate mortages only after swiss franc mortage crisis (2009), and not shorter than 5 years. What happened was banks introduced fixed mortages for 5 years, after which time you move to variable mortage, or update rates for next 5 years. Banks also made those mortages noticably pricer, so few people picked them (me included).
- jhrozek 4y ago
candiddevmike 4y ago
Are you sure? Inflation is slowing but your interest rate will remain the same. You run the risk or being laid off, and you most likely not going to see any huge inflation adjusted salary increases anytime soon.
ryanSrich 4y ago
This doesn’t make sense. Wages are decreasing. Companies are using inflation and recession fears to not just stagnate wages, but actually lower them. Public and private sectors are doing massive layoffs. No. This is a bad idea.

brailsafe 4y ago

Wouldn't the opposite be true?

spicyusername 4y ago

One thing I see that gets left out of this advice is that only works if you get a pay raise. The whole idea that inflation eats into future debt assumes that your pay inflates alongside your expenses. Inflation doesn't magically make debt cheaper, your rising salary does.

cmrdporcupine 4y ago
Also some of the assets you buy with your debt (say, a house) are also potentially losing value with inflation (and higher rates) in the mix.
- funstuff007 4y ago
  but if you buy canned goods, and finance with negative interest rate debt, that's a winner.

Ralfp 4y ago

Thats only if your earnings will also grow, keeping you ahead of the curve of growing interest rates, which will not be the case for great majority of workers. I have a mortage in Poland. Base rates went from 1.5% to 6.75%. My mortage’s monthly payment went from 1792PLN to 3200 PLN (~715 USD), where 3000 PLN is interest. This is not big enough to bankrupt me, but 1000 PLN is a lot of money here and a lot of people feel the pressure so our govt enacted law that lets you move four rates in a year to the end of mortage for two years, effectively extending the mortage by 8 months, but at no base cost of mortage changing.

pengaru 4y ago
> I have a mortage in Poland. Base rates went from 1.5% to 6.75%. My mortage’s monthly payment went from 1792PLN to 3200 PLN (~715 USD), where 3000 PLN is interest. Are fixed-rate mortgages not the norm in Poland?
- gimmeThaBeet 4y ago
  My understanding was that long-term fixed rate mortgages were not common at all outside of the US and like France. This is from 2010 but has some good charts. https://business.sdsu.edu/_resources/files/real-estate/research/10122_research_riha_lea_report.pdf https://business.sdsu.edu/_resources/files/real-estate/resea... Anecdotally it meshes with some things I've heard elsewhere but don't hold me to it: - Canadian mortgages are typically something like 5 years. - UK is similar, it's either variable, or fixed for something super short, like 2-3 years. - Australia same kind of boat, most are variable, I've heard the interest rates during covid temporarily reversed the trend, but same deal, they're only fixed for a few years.
  - pengaru 4y ago
    That's kind of wild, even in my teens (1990s in Illinois) it seemed to be common knowledge that variable APR mortgages were a risky/Bad Idea. I had no idea they were the norm elsewhere. The cynic in me would have assumed the US led the world in predatory style lending. This country loves handing people more than enough rope to hang themselves with, while depriving them of any relevant education beforehand.
- Ralfp 4y ago
  No. Bank oversight comission required banks to offer fixed rate mortages only after swiss franc mortage crisis (2009), and not shorter than 5 years. What happened was banks introduced fixed mortages for 5 years, after which time you move to variable mortage, or update rates for next 5 years. Banks also made those mortages noticably pricer, so few people picked them (me included).
jhrozek 4y ago

candiddevmike 4y ago

Are you sure? Inflation is slowing but your interest rate will remain the same. You run the risk or being laid off, and you most likely not going to see any huge inflation adjusted salary increases anytime soon.

ryanSrich 4y ago

This doesn’t make sense. Wages are decreasing. Companies are using inflation and recession fears to not just stagnate wages, but actually lower them. Public and private sectors are doing massive layoffs. No. This is a bad idea.