Question:

What is an inflation-indexed mortgage?

Answer:

An inflation indexed mortgage is the only mortgage delivering greater long term certainty for the life of the loan. That is, when inflation goes up, prices go up and mortgage payments go up. Inflation indexed mortgage loans are rarely issued - only few countries have them.

Countries with Inflation Indexed Mortgages

One such country is Turkey - they have the WIPM - wage-indexed payment mortgage. Turkey is a country with a pretty much what economists call "inflationary economy". Economies with high inflation are the ones most utilizing inflation-indexed bonds and loans. In the case of real estate, inflation indexed home loans allow families to start with higher loan amounts and still cut their monthly mortgage payment. Suddenly, houses would become affordable.

Home loans that are inflation-indexed avoid many of the risks that adjustable rate and fixed rate mortgages create; however, fixed nominal home loans seem most appropriate for most households most of the time, if they are not living in a high-inflation economy.

Investors, though, may have limited interest in inflation-based mortgage tools, as the level of return will be tied to the inflation level and investment flexibility will be more limited

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: