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Comment by adrr | Hacker News Reader

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

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Anecdotally agree 100% with this. I notice that the grocery prices for food that I typically purchase have either risen noticeably (by as much as 12% for certain Asian food items) and/or are suffering from shrinkflation (e.g., when I make breakfast for me and my wife, I was not able to fit four bread slices on an IKEA plate that I use at home; but starting a couple of weeks ago, the bread slices--same brand and still paid the same price of $1.50/bag--now fit perfectly on the IKEA plate and this is not just because of the abnormally small batch of bread. I have bought bread two weeks in a row to know for sure that the sizes have shrunk).

This. I've seen several sectors where prices are going up, and everyone always points to narrow causes particular to that sector for prices going up. But everyone seems to ignore the fact that when you add trillions of dollars to the economy one of the most understood results is that it increases inflation.

Precisely... my loan was actually too small to qualify for the lowest rates, according to research & some friends in the business, rates like 1.75% were mostly for $250k+ loans, but I was still able to refinance a line of credit we'd used to expand out house years earlier to such a lower interest rate that we're saving more than 20% off our previous monthly payment & about $50k off the total life of the loan (assuming we do an extra payment toward the principal every once & a while, which we were doing anyway).

Basically if you have a home loan from 2+ years ago & still have the same level of steady income, it probably makes sense to refinance.

> assuming we do an extra payment toward the principal every once & a while

At the risk of veering into financial advice, paying extra principle early is almost never a good idea. Instead, put that money aside into an investment account and use it to pay off the mortgage once the sum is greater than the balance.

Assuming markets beat your interest rate, you'll have a higher return and you have the emergency fund in case something catastrophic happens. If you pay that to the bank you can't get it back in an emergency, and you will only cut down on the front-loaded interest--which will likely be under market returns.

At the risk of veering into financial advice...

Fine, but if my investments tank I'll be getting a subpoena for your IP from HN, and then from your ISP for you, so I can sue you for issuing financial advice without a license, thus causing me significant material harm. /s

Actually you're right, that's a very good idea.

Line of Credits typically go off of prime which is why you didn't get the lowest rate. Most institutions do something like prime + x%. If it was a 15 year fixed or 3 year ARM, then you most likely would've gotten an awesome rate.

We were refinancing a currently open (and fixed rate) line of credit we no longer needed into a lower interest traditional mortgage.

Why pay off the principle when there are investment grade assets that pay higher return than the interest you’re paying. Not sure what they are now but municipal bonds were paying between 3% and 4% last year which is tax free. Interest rates being so low is just crazy.

Does inflation punish the poor more? It punishes people with savings, and people with savings are generally not poor. Inflation also helps anyone with a loan (because that loan just got "smaller"), and people with a lot of debt are generally poor as well.

It does punish them because minimum wage isn't indexed to inflation.

Right now I'd say probably the middle class it hurts the most. They would have more cash savings.

High net worth individuals it would hurt less as they usually have way more in assets such as stocks. But in the middle class, their stock exposure is often limited to their 401k or retirement plan.

I know quite a few people who had a downpayment in cash waiting to buy a house before this all started and are still looking. That value of cash went down quite a lot over the past year. Houses are up 40-50% YOY in some cases here (Arizona).

If wages don't go up though, this will also hurt the poor significantly.

I think it is not yet obvious if it will hit the poor or the middle class the most.

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