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Inflation measures consumer prices, not the prices of assets like housing The response to inflation is interest rate rises, which increases the monthly mortgag
by notahacker 3y ago
Inflation measures consumer prices, not the prices of assets like housing
The response to inflation is interest rate rises, which increases the monthly mortgage repayments and total future outlay of mortgage buyers who dont have long term fixed rates (as of course do other rises in costs of living). And of course, this ultimately has a negative impact on the value of the house (although generally quite a modest one, especially somewhere like the UK with a shortage of homes)
- onlyrealcuzzo 3y agoNo. ~35% of the inflation basket in the US is owner's equivalent rent - which is an indirect way of measuring rent: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... In Canada it's ~41%.
- notahacker 3y agoIf you read your own link, it explains that the entire point of estimating owner' equivalent rent is to avoid counting capital appreciation of housing in the CPI, because house prices are not consumption (and also because actual expenditure on mortgages would be particularly unhelpful to include in an inflation index because it's directly correlated with the policy variable central banks use to reduce inflation) In the UK, the subject of the OP, measured inflation is around 8% and house prices (which rose consistently above inflation for the last couple of decades) are falling. Falling house prices are not good for homeowners.
- cudgy 3y agoWhich will go down along with the prices of those homes.