Question

Suppose you obtain a fixed-rate mortgage during a period of relatively high inflation. During the next ten years, inflation falls. Are you a winner or a loser due to inflation?

Answer 1

According to the question, you will be winner due to inflation.

Because in a fixed rate mortgage, you will receice a fixed income even in time of deflation or less inflation. But when you don't have any fixed income then you also may have some loss due to less inflation. We can understand better with the help of following example:

Suppose, you lent your friend $200 for 10 years @10%p.a. Now, after ten year you will receive a total of $400. And suppose inflation is 3%p.a then you will receive only $260 after a period of 10 years.