The real dollar cost of a fixed mortgage payment decline over time (even if the nominal dollar value tends to increase slightly with property tax increases), but I don't think that's a significant factor in portfolio allocations. Unless interest rates have climbed (and if they have climbed than people are unlikely to refinance a fixed mortgage), a new mortgage will have lower monthly payments (because it will be over a longer term), or if you adjust it to have the same term (say 15 years in to a 30 year loan, you swap out to a new 15 year loan) than the payments wouldn't be higher. If inflation is higher than when you originally financed the loan than interest rates (at least nominal interest rates, which people tend to pay attention to more than real interest rates) are likely to be higher. But the lack of refinancing under such conditions is because of the rates not because of the inflation, and the rates are higher because inflation is higher, not because it is high. (To explain the distinction, imagine someone who financed with very low inflation and nominal interest rates, moving to moderate rates for both, gives you higher without high, OTOH if you financed with high inflation and nominal interest rates, than staying at high rates gives you high, but not higher.)
What would tend to keep refinancing for investment in other areas down is the cost of the refinancing, combined with the perceived risks of the investment.
In any case you can get an equity loan without doing a refinance.
When inflation is low, household find extracting their home equity to be cheaper, and therefore more frequently rebalance their portfolio.
Unless your talking about the indirect affect that low inflation tends to result in low nominal interest rates, I don't see how it makes extracting their home equity and cheaper for the reasons I detailed above. |
