Read interest rate hikes they will affect the domestic economy, how could it be otherwise. Families’ efforts to cope with mortgages will take between 5 and 6 points percent, according to CaixaBank’s report.
In a document this week, the unit considers relatively vertical rise in this indicator (which measures the percentage of income dedicated to mortgages) since the end of this year: from 34.3% at the end of August to around 42% in mid-2023, falling slightly to 40.1% in 2024.
Expert consensus recommends spending no more than a third of family income on housing, although the truth is that banks extend it up to 40%. 45% is the maximum number to consider, and above 50% is clearly considered a risky effort, as in the event of unemployment or a drop in income due to lower wages, there would be a serious risk of default.
The numbers, in any case, they are far from the impressive 54.6% effort achieved in 2008, which caused the subsequent banking crisis which in turn led to a financial bailout for savings banks. Likewise, the increase that occurred in the early years of this century is very relevant, when mortgage lending was 27% in 1999 and the rate doubled in less than eight years.
After the actions of the European Central Bank (ECB) in 2021, to defend against attacks on the euro, the ratio was around 30%, thanks to several reductions in mortgage rates that took the Euribor into negative territory as of February 2016. The following months saw the data reach its lowest level of 30%.
This caused a reduction in fees by more than double digits percent to many Spaniards. During the Covid crisis, it took a slight step back, but not because of increases in Euribor, but because of the deflationary effect on wages.
Increase in interest rates will take Euribor between 2.4%-3%, according to different predictions. In the case of CaixaBank, they foresee a benchmark of 2.4% in the financial year 2024.
CaixaBank confirms that “there is no oversupply of real estate”. This way, prices remain stable or fall by a few tenths. The financier also predicts a certain decline in apartment sales, from the current 600,000 per year to 500,000, although market consensus suggests that there is no risk of real estate bankruptcy given that the credit capital of builders is little less than insignificant: the weight of development loans is 7, 5% in the balance sheet of banks compared to 23.6% in the previous bubble. For its part, the housing loan balance is 46% of GDP compared to 63.6% during the crisis. Only 8% of mortgage loans are granted for more than 80% of the value of the property, while in 2008 it was 18%. And fixed rate loans are 60% of the total compared to 3%.
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