The rise in interest rates has turned the mortgage market upside down. As a result, the loans that banks grant to families have been becoming more expensive in recent months. And that translates into much higher mortgage payments to face. Specifically, the effort that households make is the greatest in decades, dedicating a large part of the salary to cover them in an almost unsustainable way.
The largest mortgage effort in history. The Euribor, the benchmark indicator for most mortgages in Spain, stood yesterday at 3.65% and marked maximums since 2008, the year the housing bubble burst. And the impact is already felt in the pockets of homes. Right now, a family with an average income would allocate 33.6% of them to pay an average mortgage, according to calculations by CaixaBank Research based on data from the Bank of Spain.
But to this we must add the so-called notional mortgage effort rate, which has been growing since 2021 and does not stop. So the CaixaBank study forecasts that the percentage will be around 38% in the first half of 2023. A scenario that is several points above the 30% of family income that financial experts set as a healthy limit and we have not seen for a long time. 10 years.
Implying? That housing is no longer accessible to everyone. To get an idea of the impact that increases in the Euribor have, a rise in the cost of mortgages to 4%, levels that we are already cherishing, means that only 28% of households could afford a new home and 54% one. second-hand housing, according to calculations by Unreal State using INE income data and taking into account an average price of €250,000 for new construction and €170,000 for second-hand.
But the rates will rise even more. The worst is yet to come. The European Central Bank already announced a few months ago that it intends to raise rates to 3.5% with the aim of reducing demand and inflation. This means that savers will benefit while debtors, or those with mortgages, will suffer. And a lot. In addition, the levels will take time to return to normal, since achieving the objective of reducing inflation to 2% is still quite far away.
less demand. As is foreseeable, as mortgages rise, people will demand fewer loans, something that has already begun to be noticed at the end of 2022 and the first months of 2023. CaixaBank Research forecasts that only about 480,000 houses will be sold in Spain this year, 26% less than last year. The biggest drop will come from the second-hand market, which has grown a lot in 2022, while home construction will continue at a rate of about 110,000 units per year, well below previous levels.
bye bye savings. In total, families are now not only coping with rising interest rates and inflation. As Mikel Echevaren, CEO of Collier, explains in this article in El Confidencial, “there is a third factor that is not being talked about and that is even more important than inflation: the increase in personal income tax for families.” As he says, “between the three of them they will consume almost all the family savings generated during the pandemic, this anticipates lower sales rates and a decrease in consumption.”
The rents, the same story. Just like we have commented on Magnet before, the real estate market situation has also changed a lot in the last 12 months. A idealist studio notes that the effort of tenants to pay rent has also skyrocketed. The largest case is found in Barcelona, where the share has shot up to 47.5%. After the Catalan capital are Bilbao, which reaches 38.3%, Madrid, which goes from 33.1% to 37.7%, and San Sebastián, where the effort grows from 31.5% to 35.4% .
According to the latest price report from Idealistic, January ended with a monthly rise in the rental price in the Spanish market of 1.5%, reaching 11.6 euros/m². Its about historical maximum price registered by the company since it was founded in the year 2000.
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