If we enter a period of hyperinflation in the US, what would happen to fixed rate mortgages?

Question

for example a 30 year at 6% interest. Do they change it?

Answer 1

well from what i understand,

we can only enter a period of hyperinflation if the STUPID board of governors in the federal reserve (headed by ben bernanke) lower the key interest rate any lower (it is currently at 2%, which is down from like 6% just over a year ago).

this is the rate at which commercial banks and the us government can borrow money at, and anything above that rate that the commercial banks charge is pretty much their profit.

considering the recent financial blow to the us economy, it is unlikely that with the fed lowering the interest rate, banks will offer mortgage loans at lower interest rates as well since they have to make their "lost" money back.

for that reason, even IF we enter a period of hyperinflation, it is HIGHLY unlikely that banks will lower their 30 year fixed loans, HOWEVER, assuming they did, people with "6%" interest rates on their mortgages can refinance their homes into the lower rate, say, assuming the bank offers a rate lower then the 6%.

u must understand though, that refinancing a home into a new lower rate most likely will penalize the borrower in some monetary way, but worst off, the newly refinanced loan will initiate a NEW 30 year mortgage loan. obviously, if you are 15 years into paying off your house, you are better off with sticking with your current 'fixed' mortgage, however, if the interest rate drops from your current fixed 6% and now the banks are offering 5% (assuming u qualify), and if you've only had your mortgage loan for a day to a few years (i'd say 5 years tops), then yeah, it might be beneficial to refinance.