Here's a question that's been bothering me. I bought a residence in 2009 for essentially nothing down and a 30 year fixed mortgage at under 5%. What happens when inflation takes off - I think it already has begun - and then the bank is left with me paying off the loan for what increasingly looks like Monopoly Money. Will the Spirit of Cyprus play out here as a unilateral re-writing of the loan agreement to keep payments up with inflation? It's hard to imagine that the banks will stand by as I begin to pay them confetti. Am I wrong?
Unless the laws are changed, you have a contract which they can enforce, but so can you.
Just hope there is no small print that gives them options that would be unacceptable to you, like an adjustable rate.
Inflation is to your advantage, so long as you have the income to make payments, and that is why we have it for the same inflation that works for you works for the government when they are paying off their loans.
Inflation also puts you in a higher bracket, so they get more of your money. Adjustments the IRS makes are behind the curve, so you can’t stay even.
This is the enviable situation to be in, loads of assets bought with fixed-rate credit.
The only problem is, that when money fails, governments go after other assets as well.
Under the Weimar Republic, landlords gave away the keys to property to tenants as property taxes soared to untenable levels, anyone with any kind of property that could be seized or taxed could lose it - including real estate.
It is difficult to predict how this will play out.