Deflation Ain't So Bad

Not for all of us anyway Kiwi families will have a collective $10 billion more in their back pockets over the next three years as a result of plummeting mortgage costs

Tony Alexander's weekly overview shows the inflation rate over the last two quarters and year as -0.5%, 1.5, and 3.4.
This is great news for people like me paying a mortgage similar to the example in the article :

For a household with a 20-year mortgage of $250,000, currently paying $1005 a fortnight, a reduction in rate from 8.51% to 6% would mean being able to cut repayments to $830 a fortnight...Kapiti Coast financial adviser Liz Koh recommends maintaining mortgage payments at the original level, which would see the loan cleared nearly six years earlier, and around $120,000 less paid in interest.

While we haven't gone under at the rates of the last two years, I'll be very glad to see 5% rolling in this year. My last loan being in 2004, I know others who are hurting not so much by the increases but knowing they are locked in for the next 2 plus years with no access to the savings to be had while others are hooking into the new rates.

Auckland financial planner Deborah Carlyon says for many families high petrol, interest rates and food prices have meant money has been so tight they had been deferring spending on things like replacement cars, clothes, house repairs and whiteware. So any extra money in their pockets is likely to flow into the economy quickly.

Our old F&P, bought 10 years ago along with dryer (1k for the pair)as my farewell gift from last employer, finally gave up the ghost and we have splashed out on the next model up for $590, about the same price - way cheaper with inflation factored in, and the family income is now up by close to 100k on those toddler years. Clothes, shoes, cars, and computers are cheaper, and petrol is not far off. As long as both of us keep our jobs, this recession is going to be a fantastic ride. We may not be getting the same equity gains, but being able to reduce debt faster will be a huge help.

Can't wait for the tax cuts John.