Under the current macroeconomic climate, inflation is the rule of the day. Every year, the average buying power of the dollar decreases two to four percent. That should be discouraging news for savers, but it should be music to the ears for buyers taking out a traditional mortgage on their dream home. Why?
As the value of the dollar decreases, businesses increase prices to make up for it. As prices go up, wages also have to go up so that workers can maintain their current standard of living. While prices keep going up for the same goods, and wages keep going up for the same services, the principal and interest payment (the bulk of the monthly payment) on a fixed-rate mortgage remains the same!
As a result, housing expenses as a percentage of monthly income will shrink over time for buyers who take advantage of traditional fixed-rate financing today. A monthly payment of $700--which may be back-breaking today--could end up costing less than your monthly fuel and utilities in as little as five years time.
Just something to think about...