ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inflation allows borrowers to pay lenders back with money worth less than when it was originally borrowed, which benefits borrowers. When inflation causes higher prices, the demand for credit increases, raising interest rates, which benefits lenders.

Detailed explanation-2: -Does inflation affect fixed-rate mortgages? If you are already paying off an existing fixed-rate mortgage loan, higher inflation will not impact your payment. Your interest rate is already fixed and won’t rise even if interest rates rise for new mortgages.

Detailed explanation-3: -Inflation benefits those with fixed-rate, low-interest mortgages and some stock investors. Individuals and families on a fixed income, holding variable interest rate debt are hurt the most by inflation.

Detailed explanation-4: -When it comes to pricing mortgages (regardless of where the Bank sets base rates), it’s inflation that really matters. Higher inflation simply leads to higher interest on mortgages. This is what makes life difficult for borrowers. As mortgage rates outpace inflation, the interest bill just keeps climbing.