Inflation

Inflation refers to the rise in prices of products and services over time. As prices go up, the value of currency declines, causing a unit of currency's purchasing power to go down. While low rates of inflation are normal and even healthy for the economy, severe inflation can hurt consumers and have a negative effect on the economy. In real estate, inflation has a noticeable affect on mortgage rates. A high inflation rate may make it more difficult to secure a mortgage, or it may cause mortgage rates to rise. However, on the other hand, many economists see investment in real estate as a way to safely "hedge" against inflation. This is because the value of real estate tends to rise alongside inflation rates. Investing in property, in theory, is a way to prevent against currency deflation.