[candiodari]

The loan amount, however, will stay contant.

Your pay goes up. It just goes up 4% per year, while inflation goes up 10%. This does mean your loan becomes 4% "less" per year. It's just Big Macs go up 6%, making your pay worth less Big Macs. But your pay still becomes worth more loan repayments. The big increase only applies to new loans.

I would also like to point out that at 4% per year pay increases, houses become worth that amount less per year, for the same dollar amount. That means they "drop" 20% in price over 5 years.