Final answer:
A mortgage is a legal contract for a house loan, where interest rates and inflation affect whether it's better to be a borrower or a lender. Lenders can also sell mortgages in the secondary loan market, affecting the value of these assets.
Step-by-step explanation:
A mortgage is a legal contract that represents a loan for the purchase of a house. The terms involve the borrower repaying the loan over time, typically 30 years. When analyzing the benefits of a mortgage from the perspective of either the borrower or the lender, the interest rates and inflation rates for different years are key. If the mortgage interest rate is lower than the rate of inflation, it would generally be better to be a borrower, as the real interest rate (considering inflation) is lessened over time. On the other hand, if the interest rates are high compared to inflation, it is often better to be the lender, as the value of the repayments in real terms is greater.
Understanding this dynamic is crucial when considering the value of a mortgage from a bank's perspective as an asset. Banks not only lend money but may also sell these loans in the secondary loan market. The primary loan market is where the loans are originated, and the sale of these loans to other financial institutions can also impact the overall value of these assets.