2023-06-18 05:15:38
Last Thursday, the European Central Bank (ECB) continued its crusade against inflation by raising interest rates again. The rates, which currently stand at 4%have had a direct effect on the Euribor, which has exceeded the 4% threshold in recent days, which has a direct impact on the price of mortgages, especially those contracted at a variable rate.
The eighth consecutive rise in interest rates seems like a new blow to the housing market, which, in the last 12 months, has been pressured by the continuous increases in interest rates carried out by the institution led by Christine Lagarde. Such has been the influence of the economic policy exercised by the ECB, that they have undertaken the fastest rate hike cycle in the entire history of the monetary body.
The increase in mortgage prices, one of the keys in Pedro Sánchez’s speech
In Spain, as in the rest of Europe, the housing market has fallen into a spiral marked by the increase in the cost of bank loans, which, in the end, has made it difficult for a large part of Spaniards to access housing. In all this, Pedro Sánchez, President of the Government, has a key role, not so much because of what can influence the price of the mortgage (which is nothing), but because access to housing has become one of the key premises in his speech.
Access to housing is a national cause that concerns us all.
We went from talking about land, speculation and luxury goods to talking about a right.
Today I have met with groups from the sector to promote this change in model.
It is the fifth pillar of the welfare state. pic.twitter.com/inbbwp8jOc
— Pedro Sánchez (@sanchezcastejon) May 8, 2023
So much so, that the Government led by the Madrid politician has promoted a Housing Law and has launched measures linked to facilitating the acquisition of a property, such as, for example, the creation of the line of guarantees for the ICO.
Be that as it may, the housing market has come to the fore, both economically and politically, in the last two years. In fact, it has been the maelstrom of interest rate rises, which have made bank credit more expensive, the factor that has encouraged the Government to more vehemently include in its speech the need to lower housing costs.
We live in a country where many households are finding it increasingly difficult to pay their mortgages, while 5 large financial institutions have extraordinary benefits.
Freezing mortgages and moderating benefits is the way for us all to win. pic.twitter.com/9OhbB24LnH
— Yolanda Diaz (@Yolanda_Diaz_) February 3, 2023
Mortgage prices have skyrocketed in the last year
That is why it is convenient to look back and see how the mortgage prices were in July 2018, when the president entered Moncloa, and pay attention to the point at which they are now. It should be noted that, despite the fact that the average capital requested for mortgages has varied in recent years, the difference between what was paid for the installment in 2018 and what is currently paid is similar.
From July 2018 to June 2023, the month in which the legislature of Sánchez has closed, the monthly payment of the average mortgage in Spain has grown by 53%. At the time the president entered Moncloa, the average mortgage payment amounted to 536 euros, while currently, the monthly payment has grown to 821 euros.
And it is that, the ‘Sánchez era’ has been plagued by setbacks that have marked the evolution of the Spanish economy. The health crisis caused by Covid-19, the start of the war in Ukraine, the influence of the armed conflict on prices, and, finally, the start of the cycle of interest rate hikes by the ECB after seven years without increases. These have been the four main legs of the national economic table in the Sánchez legislature.
All of them with a direct influence on the level of inflation, the interest rates applied by the ECB and, ultimately, on the price of Spanish mortgages.
The Euribor exceeds 4%
The housing market is facing a situation that, if it was complex in itself, could worsen with the rise in the Euribor. The reference indicator for national banks when setting mortgage rates does not stop growing. In fact, The prospects suggest that the Euribor will close June at 3.91%signing what would be the seventeenth consecutive month of increases and touching the highest level since December 2008.
Everything indicates that the Euribor will close June at 3.91%
Based on what was expressed by Christine Lagarde in the last monetary meeting, what is to come are new interest rate hikes and, therefore, a further rise in the Euribor. That is why Itsaso Azpeteguia, an analyst at Ebury, sees “it is very probable that the indicator will approach 5%” if the trend in interest rates continues to rise.
For his part, Javier Rivas, a professor at EAE Business School, believes that the ECB will raise “interest rates to 4.5%”, which implies that, regardless of whether or not there is a change of government, whoever is the leader of the Executive must face a mortgage market with skyrocketing prices.
Be that as it may, Pedro Sánchez has put the finishing touch on his legislature in a volatile macroeconomic environment, fraught with uncertainty and with skyrocketing mortgage prices in Spain, among other things.
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