Re:In Argentina, inflation is a way of life
by ethbr0 on Thursday January 27, 2022 @11:28PM
(#30110714)
> ... a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.)
Is that accurate to say? Because I don't think so.
It seems more accurate to say mortgage rates for fixed loans are set by the cost of money at purchase / loan-initiation time.
Which makes sense, as that's when funds are actually changing hands (from purchaser's lender to seller).
And ultimately, that's banks' cost of money, which means then-current Fed rate + spread, no?
A variable 2.75% with inflation at an unusually high 7% would be weirder than a fixed; a variable rate loan has a rate based on current conditions, a fixed rate loan has rated based on expectations over the lifetime of the loan (both in terms of value of money and risk of loss.)
Now, it may seem weird that you can get a 30-year fixed loan at all, but once you accept that, having the rate below current inflation when inflation has been at a unusually high level for a shirt period of time isn't particularly odd.