REAL ESTATE – FINANCING – MARBELLA WOHNEN – The ECB raises interest rates: how does it affect loans and mortgages?
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The ECB raises interest rates: how does it affect loans and mortgages?
This is the largest rise in the history of the euro, rising 0.75 points. The rise brings with it an increase in the cost of loans and mortgages contracted at a variable rate.
The European Union continues to battle high inflation, generated as a result of the war in Ukraine and the energy crisis, and which has not yet fallen below two digits in our country. An increase in prices that still has a negative impact on the most basic aspects of citizens’ lives.
To do this, the European Central Bank (ECB) has raised interest rates. This is the largest rise in the history of the euro, since the increase reaches 0.75 points, from the last increase to 0.5 points by the body chaired by Christine Lagarde. In this way, the European body has opted for the rise in the price of money by three quarters of a point, up to 1.25%, to tackle the average inflation in the euro zone, now at 9.1%.
«A stagnation of the economy is expected during the last months of the year and in the first quarter of 2023,» the Eurobank said in a statement. At the same time, he pointed to several factors responsible for this upward trend, including energy and food prices, demand pressures in some sectors due to the reopening of the economy, and bottlenecks. in the offer. Forecasts point to inflation of 5.5% in 2023 and 2.3% in 2024.
On the other hand, the ECB highlights that energy prices «are reducing the purchasing power of citizens’ income and, although the bottlenecks are relaxing, they continue to limit economic activity.» Likewise, experts foresee economic growth of 3.1% in 2022, 0.9% in 2023 and 1.9% in 2024.
In addition, they have established a clear objective with respect to inflation, which is none other than its decline and subsequent stabilization at 2% in the medium term. The Transmission Protection Instrument is available to counter undesired or disorderly market dynamics that constitute a serious threat to the transmission of monetary policy to all countries in the euro area.
Increased cost of variable mortgages and loans
In the field of housing, the rise in interest rates has resulted in higher prices not only for variable-rate mortgages, whose fee is marked by the Euribor, but also for those who buy a house now. The higher the cost of financing for the entities, the more likely it is that they transfer that to the loans they grant to their clients, including mortgage loans.
In the case of mixed mortgages, with fixed interest during the first years, they will be affected by the rise in the Euribor when they go on to have variable interest. Almost 30% of the mortgages contracted at a variable rate in our country will be affected by this increase.
In any case, when making the decision to invest in housing, the professional advice of an expert is key, such as the real estate professional, who guides the buyer and resolves all the doubts that may arise throughout the process. Do you want an expert to advise you without any commitment? Let yourself be advised by a specialist.
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