Impact of inflation on loan repayment

Hello,

how do you assess the impact of inflation? (Deflation is rather unlikely.)

Assuming that inflation is around 2% per year for the next 30 years with corresponding wage increases (i.e., constant purchasing power). Then the (remaining) loan amount would decrease in value 30 times by 2% each.

If I calculate correctly, the (remaining) loan amount would then be reduced to about 54% of the original value (x 0.98^30). This means the loan does not pay itself off, but it helps.

Alternatively, inflation can also be offset against the interest to be paid to the bank. That means, for example, that 3% mortgage interest becomes "net" 1%.

Am I making a mistake in my thinking?
Does this play a role in your considerations?

What you write is not entirely correct, but also not wrong.

The basic idea is right. Inflation helps with loan repayment, deflation makes it more difficult.

However, your personal wage increase must be considered, not the general inflation.

Therefore, I would not want to "calculate" concrete numbers because overall it is naturally an ideal model calculation development.

Everything else around it also becomes more expensive, which in turn speaks against the possibility, for example, of making additional repayments.

Suppose inflation were about 2% per year over the next 30 years with likewise wage increases (i.e. constant purchasing power). Then the (remaining) loan amount would decrease in value 30 times by 2% each.
If I calculate correctly, then the (remaining) loan amount would have been reduced to about 54% of the original value (x 0.98^30). So the loan doesn't pay itself off, but it helps.

I don't get it,...
The loan amount always stays the same in nominal terms (sum xxx must be repaid). But you need to spend less % of your income to repay the fixed sum (if your income rises accordingly to the inflation rate). That makes the loan "cheaper" for you.
But why should the loan amount itself shrink?

The loan amount as a number remains the same, the ratio to the annual net income changes, as you yourself have recognized Wastl.

This "reduces" the burden of the loan relative to the total expenses. The loan becomes "cheaper" over time.

Today, a 1000 euro installment is to be evaluated against a 3000 euro income. In 30 years, however, one will only have 4500 euros in pocket due to wage increases based on inflation/collective agreements (no additional wage from promotion). The loan remains, ceteris paribus, at 1000 euros. => Cheaper

Everything else around it is also getting more expensive, which in turn speaks against the possibility, for example, of making additional repayments.

Assuming that personal wage increases are identical to inflation, additional repayments could be made on the annuity in the amount of the respective inflation.
With 2% inflation and an assumed annuity of €1000/month, that amounts to €20/month in the first following year. That doesn't sound like much at first.
However, over 10 years, this adds up to a special repayment of €11,400; over 15 years it would already be €27,500.

That's why I find discussions about interest rates after the end of the fixed interest period pointless, because then a rate is calculated under current conditions without taking inflation into account. No one considers that interest rates >7% would also entail inflation >2%.

Yes, loans "inflate away," which is why governments find inflation so practical and want / will prevent deflation at any cost. You just have to make sure that income rises by at least the inflation rate. In my opinion, this is also the big advantage of ownership over renting. If at the time of purchase the monthly payment corresponds to the cold rent for a comparable property, then over the years it looks very different, thanks to fixed loan installments but at least rents rising with inflation.