The cost of living increases are heavily driven by housing prices, which they’ve already locked in for themselves.
Unless unemployment spikes dramatically (the opposite of what’s been happening) and they lose their jobs and they bought homes on the ragged edge of what they could pay monthly, this is unlikely to be an issue.
There's a delicate balance... if interest rates rise to control inflation, prices will drop and the 2008 crisis demonstrated that many will just walk away from their homes, which triggers another round of price drops.
>> They get to pay back their loans with cheaper dollars
but they also have to pay for energy, food and automobiles, all of which is going up much faster than the average person's salary.
imo, the first area that is going to take a hit is in consumer discretionary spending - people will hold onto their tv's, smartphones, computers and a lot of other things longer than usual, because the things they have to buy (food, energy etc) are all going up dramatically. An awful lot of people live paycheck-to-paycheck and spend at least 100% of everything that comes in each month. Where my spouse works, 2/3's of the employees are in a panic if their paycheck is a single day late; they just don't have a cushion to fallback on.
Consumers cutting back on the 'extras' will be the first domino to fall.
This is very simplistic. If wages do not rise this doe snot help the borrower. And rising inflation will probably mean a higher risk of that same person becoming unemployed.
Unless unemployment spikes dramatically (the opposite of what’s been happening) and they lose their jobs and they bought homes on the ragged edge of what they could pay monthly, this is unlikely to be an issue.