Final answer:
The 30-yr fixed-rate mortgage is not a non-traditional loan. Homeowners with an adjustable-rate mortgage will likely see decreased payments if inflation falls by 3%. When borrowing or lending money, the comparison of interest rates and the rate of inflation determines who benefits more. The correct option is A.
Step-by-step explanation:
The loan which is not a non-traditional loan is A. 30 yr fixed rate. Traditional mortgages typically offer a fixed interest rate, where the payment remains constant over the life of the loan.
Non-traditional loans, such as interest-only loans, pay option ARMs, and negative amortization loans, offer alternative payment structures, which often start with lower initial payments that may adjust over time and carry more risk to the borrower.
If inflation falls unexpectedly by 3%, a homeowner with an adjustable-rate mortgage (ARM) will likely see their interest rate and mortgage payments decrease. This is because ARMs are often tied to an index that reflects market interest rates, and lower inflation tends to lead to lower interest rates.
When discussing when it would be better to borrow or lend money, the general principle is that borrowers benefit from borrowing when interest rates are lower than the rate of inflation, and lenders benefit when interest rates are above the rate of inflation.
This is because inflation erodes the value of money, and having an interest rate above inflation means that the lender maintains or increases the real value of the money lent.