Final answer:
A Commercial bank's 15-year loan is considered a conventional mortgage loan. Conventional loans are not backed by government entities and adhere to standards set by Fannie Mae and Freddie Mac. Homeowners with adjustable-rate mortgages would benefit from a decrease in inflation, as their interest rates and mortgage payments would also likely decrease.
Step-by-step explanation:
The loan considered a conventional mortgage is option C) a Commercial bank's 15-year loan. Conventional loans are those not insured or guaranteed by government agencies such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, they are available through private lenders like commercial banks and are typically conforming, meaning they adhere to the funding criteria set by Fannie Mae and Freddie Mac.
Generally, mortgage loans can be either fixed-rate or adjustable-rate mortgages (ARMs). With fixed-rate mortgages, the interest rate remains the same for the entire term of the loan. In contrast, the interest rate on an ARM can fluctuate according to market conditions. If inflation falls unexpectedly by 3%, homeowners with an adjustable-rate mortgage might expect their interest rates and related mortgage payments to decrease, making it less costly to borrow over time.
In the context of the mortgage interest rate and the rate of inflation, whether it's more beneficial to be a borrower or lender depends on the comparison between these two rates in any given year. Ideally, a borrower would benefit when real interest rates (adjusted for inflation) are low, as the cost of borrowing is lower compared to other periods.