structural:scholar_edition, quality:correction
Spending

A consumer price index compares how much it would cost now to do exactly what consumers did in the reference period with what it cost then. Application of the principle thus requires that the index for our one house owner reflect the movement of the prices of houses like hers from 2006 to 2007 and the change in interest rates. If she took out a fixed-interest mortgage, it is the change in interest rates from 2006 to 2007 that counts; if she took out a variable-interest mortgage, it is the change from 2009 to 2010 that counts. Thus, her current index with 1999 as a reference period will stand at more than 100 if house prices or, in the case of a fixed-interest mortgage, interest rates rose between 2006 and 2007.