What happened to mortgages in the Wiemar Republic?
Discussion
The banks don't have exposure, they effectively sell the risk on to someone else (the instrument is an 'interest rate swap' of you need more information.) If you could get a fixed rate loan contract during a period of hyperinflation it would likely be at a far higher interest rate that would take into account inflation.
speedy_thrills said:
The banks don't have exposure, they effectively sell the risk on to someone else (the instrument is an 'interest rate swap' of you need more information.) If you could get a fixed rate loan contract during a period of hyperinflation it would likely be at a far higher interest rate that wiuld take into account inflation.
What interest rate would that be? Thousands of percent?speedy_thrills said:
The banks don't have exposure, they effectively sell the risk on to someone else (the instrument is an 'interest rate swap' of you need more information.) If you could get a fixed rate loan contract during a period of hyperinflation it would likely be at a far higher interest rate that would take into account inflation.
An interest rate swap is precisely that, swapping your exposure on a variable interest rate. It does not mitigate any risk on the principal (to the consumer or the bank, which the latter have already done with your deposit) which will always be relative to the value of the underlying asset i.e. your house unless repackaged as ABS which is an entirely different product.Of course the bank's own risk on the back of fixed rate lending will hedged in other ways across their portfolio and if your mortgage is rolled into a larger product this will provide a variable rate of interest to the purchaser.
Edited by R Mutt on Monday 16th March 15:35
Piersman2 said:
Well yes, until the Russian tanks rolled through you mortgage free home! 
Yes, obviously and I get that. Ultimately it wasn't a happy ending in that sense. Let me try and broaden this a bit. What about other countries that have undergone hyperinflation? Have people with mortgages gained massively as a result?
The closest we've had in the UK was in the 70s but that wasn't hyper inflation in any real sense.
Comstock said:
Yes, obviously and I get that. Ultimately it wasn't a happy ending in that sense.
Let me try and broaden this a bit. What about other countries that have undergone hyperinflation? Have people with mortgages gained massively as a result?
The closest we've had in the UK was in the 70s but that wasn't hyper inflation in any real sense.
https://en.wikipedia.org/wiki/Hyperinflation_in_ZimbabweLet me try and broaden this a bit. What about other countries that have undergone hyperinflation? Have people with mortgages gained massively as a result?
The closest we've had in the UK was in the 70s but that wasn't hyper inflation in any real sense.
https://smallbusiness.chron.com/happens-debt-durin...
Surely if your mortgage is on a tracker rate , then hyperinflation is terrible, if its a fixed rate and so long as you can repay it, you win.
Comstock said:
A bit of a tangent, but it's economics related.
What happened to people with mortgages or other debts under the Wiemar Republic during the hyper inflation period?
Dream scenario, surely?
You need to read the book When Money Dies and watch the Mike Maloney videos on YouTube re the history of money. Scary and as per reply above, if on a variable rate very bad news.What happened to people with mortgages or other debts under the Wiemar Republic during the hyper inflation period?
Dream scenario, surely?
Edited by Unsorted on Monday 16th March 17:44
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