Jump to content
House Price Crash Forum
NatterJackToad

Is Inflation Good For Me

Recommended Posts

so, after a few years waiting i decided to buy a house in jan-10.

this was cos i thought it would be easier for the government to print and inflate their huge debts away... so decided im take the risk on a house thinking deflation would not occur

so i thought what i would want to hear in the news is reports on high inflation

which is what we've got

inflation makes money worth less

my debt is now worth less

but you guys on here also champion inflation as good news saying, "well, that house is now worth 4% less in real terms as inflation is wasting away the value of the house"

confused!

Share this post


Link to post
Share on other sites

so, after a few years waiting i decided to buy a house in jan-10.

this was cos i thought it would be easier for the government to print and inflate their huge debts away... so decided im take the risk on a house thinking deflation would not occur

so i thought what i would want to hear in the news is reports on high inflation

which is what we've got

inflation makes money worth less

my debt is now worth less

but you guys on here also champion inflation as good news saying, "well, that house is now worth 4% less in real terms as inflation is wasting away the value of the house"

confused!

Perhaps you ought to have explored this issue prior to purchase. :P

Inflation per se does not help you. The part that matters is how your wages change in relation to prices. CPI/RPI reduce the purchasing power of currency, and hence your debt, but that also applies to the currency you earn so unless your wage rises beat the rate of decline of purchasing power, your debt will rise in real terms. Simples.

Edited by cheeznbreed

Share this post


Link to post
Share on other sites

so, after a few years waiting i decided to buy a house in jan-10.

this was cos i thought it would be easier for the government to print and inflate their huge debts away... so decided im take the risk on a house thinking deflation would not occur

so i thought what i would want to hear in the news is reports on high inflation

which is what we've got

inflation makes money worth less

Price inflation, wage inflation or monetary expansion?

Two of those are good for nominal house values.. one of them isn't.

my debt is now worth less

Depends what you value your debt in.. In pounds it hasn't changed. In petrol it is worth less.

Which are you planning to pay it off in?

Share this post


Link to post
Share on other sites

so, after a few years waiting i decided to buy a house in jan-10.

this was cos i thought it would be easier for the government to print and inflate their huge debts away... so decided im take the risk on a house thinking deflation would not occur

so i thought what i would want to hear in the news is reports on high inflation

which is what we've got

inflation makes money worth less

my debt is now worth less

but you guys on here also champion inflation as good news saying, "well, that house is now worth 4% less in real terms as inflation is wasting away the value of the house"

confused!

how can you have been on this site for so long and not even understand what you have done?

If I were you I wouldnt revisit this thread because when someone lays it all out then you are not going to be happy. Forget this site, you have a house now, concentrate on getting rid of that mortgage as soon as you can. Good luck.

Share this post


Link to post
Share on other sites

Inflation per say does not help you. The part that matters is how your wages change in relation to prices. CPI/RPI reduce the purchasing power of currency, and hence your debt, but that also applies to the currency you earn so unless your wage rises beat the rate of decline of purchasing power, your debt will rise in real terms. Simples.

OK, so high inflation + high wage rises then is the best news for a home owner with large debts?

of course this is with house prices moving "sideways" that is.

as in my £120k house will still be worth £120k in 10 years, but inflation in real terms has eroded the value but also eroded the debt?

Share this post


Link to post
Share on other sites

OK, so high inflation + high wage rises then is the best news for a home owner with large debts?

of course this is with house prices moving "sideways" that is.

as in my £120k house will still be worth £120k in 10 years, but inflation in real terms has eroded the value but also eroded the debt?

Forget inflation.

What you need is increases in pay - this is what erodes the debt.

Price inflation doesn't affect the amount you owe. I believe that currently average wages are falling - this doesn't help the paying back of debt.

Share this post


Link to post
Share on other sites

OK, so high inflation + high wage rises then is the best news for a home owner with large debts?

of course this is with house prices moving "sideways" that is.

as in my £120k house will still be worth £120k in 10 years, but inflation in real terms has eroded the value but also eroded the debt?

The debt is only eroded if you get inflationary pay rises. Your ability to pay the mortgage only improves if you get above inflation pay rises. Hopefully you will get a pay rise some time in the next 25 years :)

Share this post


Link to post
Share on other sites

OK, so high inflation + high wage rises then is the best news for a home owner with large debts?

of course this is with house prices moving "sideways" that is.

as in my £120k house will still be worth £120k in 10 years, but inflation in real terms has eroded the value but also eroded the debt?

The rate of price rises is not so important as long as your earnings (wherever they come from- eg foreign dividends, Sterling wages, whatever) rise more quickly. You are engaged in a two-horse race against price rises; doesn't matter how fast your horse is if the other one is doing likewise- the 'real' value of the debt stays the same. But, even if your horse isn't moving, if price rises go into reverse then your debt is smaller in relation to your earnings. However, given current rates of price rises if your earnings are not rising at 5% per annum or so, the real value of your debt is growing in relation to your ability to pay it off.

People with large debts which they pay off via earnings are helped by above-index(RPI/CPI) rises in their earnings.

Edited by cheeznbreed

Share this post


Link to post
Share on other sites

The debt is only eroded if you get inflationary pay rises. Your ability to pay the mortgage only improves if you get above inflation pay rises.

Very concise. Welcome to the forum :)

Share this post


Link to post
Share on other sites

The debt is only eroded if you get inflationary pay rises. Your ability to pay the mortgage only improves if you get above inflation pay rises. Hopefully you will get a pay rise some time in the next 25 years :)

The debt is only eroded if you get inflationary beating pay rises and the debt is fixed. Odds of the mortgage rate from the bank increasing faster than a generous employer could increase wages?

Welcome btw.

Share this post


Link to post
Share on other sites

OK, so high inflation + high wage rises then is the best news for a home owner with large debts?

of course this is with house prices moving "sideways" that is.

as in my £120k house will still be worth £120k in 10 years, but inflation in real terms has eroded the value but also eroded the debt?

High inflation makes the grocery bill bigger, the petrol bill bigger, the gas and electric bill bigger, not good.... if you have pay rises that keep up with that it's all O.K.

Sadly, wages are going down as we have lots of unemploment so it's a bit hard to ask for a pay rise.

Larger bills make it harder for you to make the mortgage payments.

Sorry mate.

Share this post


Link to post
Share on other sites

The debt is only eroded if you get inflationary beating pay rises and the debt is fixed. Odds of the mortgage rate from the bank increasing faster than a generous employer could increase wages?

Welcome btw.

Thanks for the warm welcome. Not sure it has to be inflation beating to erode the debt, the wage just has to increase. I admit I took a pretty simplistic approach but you have to draw the line somewhere. i.e. job loss would have more effect than rates/inflation etc.

Share this post


Link to post
Share on other sites

If I were you I wouldnt revisit this thread because when someone lays it all out then you are not going to be happy. Forget this site, you have a house now, concentrate on getting rid of that mortgage as soon as you can. Good luck.

What he said..

You bought your home to live in.. don't worry about the value and timing the market, just over pay the mortgage as quick as you can and get on with life :)

Share this post


Link to post
Share on other sites

Thanks for the warm welcome. Not sure it has to be inflation beating to erode the debt, the wage just has to increase. I admit I took a pretty simplistic approach but you have to draw the line somewhere. i.e. job loss would have more effect than rates/inflation etc.

I say inflation beating because you and I know that there is a substantial difference between headline rates and real inflation that dents your wallet at the tills.

The main point though is that even with wage rises matching inflation that the debt is not being eroded if the mortgage rate also rises in line with inflation. The debt remains constant at best.

The situation is obviously made far worse when the asset is also falling in value.

It could be worse though, my cousin recently bought a shared ownership new build - bad enough one would think but to make it worse she has only just started the job contracting and he hasnt got one yet :blink:

Share this post


Link to post
Share on other sites

so, after a few years waiting i decided to buy a house in jan-10.

this was cos i thought it would be easier for the government to print and inflate their huge debts away... so decided im take the risk on a house thinking deflation would not occur

so i thought what i would want to hear in the news is reports on high inflation

which is what we've got

inflation makes money worth less

my debt is now worth less

but you guys on here also champion inflation as good news saying, "well, that house is now worth 4% less in real terms as inflation is wasting away the value of the house"

confused!

...houses and property rose with inflation when wages matched thereabouts inflation ...this is not the case in this burst ..and property will continue to decline in value .... :rolleyes:

Share this post


Link to post
Share on other sites

so, after a few years waiting i decided to buy a house in jan-10.

this was cos i thought it would be easier for the government to print and inflate their huge debts away... so decided im take the risk on a house thinking deflation would not occur

so i thought what i would want to hear in the news is reports on high inflation

which is what we've got

inflation makes money worth less

my debt is now worth less

but you guys on here also champion inflation as good news saying, "well, that house is now worth 4% less in real terms as inflation is wasting away the value of the house"

confused!

5685054706_258c8dda26_b.jpg

Share this post


Link to post
Share on other sites

You don't pay a mortgage with the price of tomatoes.

Share this post


Link to post
Share on other sites

You don't pay a mortgage with the price of tomatoes.

....because when you need tomatoes to eat and they take up more of your income each month then there is nothing left to actually pay the mortgage?

Share this post


Link to post
Share on other sites

dont forget inflation is relative. the reality is that although the price of goods are rising, the price of houses are falling.

so the price of your house will be deflating in any case.

Edited by mfp123

Share this post


Link to post
Share on other sites

....because when you need tomatoes to eat and they take up more of your income each month then there is nothing left to actually pay the mortgage?

...the secret is to save some of the seeds and grow your own.... :rolleyes:

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.