The Euribor it returned to positive territory at the beginning of 2022, after six consecutive years in negative figures. Furthermore, the worst news was confirmed with a upward trend that continues and that affects, mainly, people who contracted a mortgage loan at a variable rate.
To counteract inflation, the European Central Bank (ECB) announced a rate hike of 75 basis points, thus becoming the biggest rise in the history of the euro. In this way, the European organization 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%. For the coming years, the agency’s forecasts pointed to a inflation of 5.5% in 2023 and 2.3% in 2024.
From the body chaired by Christine Lagarde, on the other hand, they have explained that the price of housing will fall. A decrease that could be 9% in two years, for each point that mortgage rates rise. In an article published on its official website, renowned economists such as Niccolò Battistini or Johannes Gareis mentioned that, in the first quarter of the year, there was a rise in interest rates on mortgages for 63 basis points.
According to the linear projection plotted by technical experts at the ECB, the decrease could be 5% for homes and 8% in real estate investment, if there is an increase of one percentage point in the price of the three types of mortgage (fixed, variable and mixed). A decrease that would be 9% and 15%, respectively, if a non-linear projection continues to take into account greater price sensitivity due to the low interest rate environment.
Trend changes in the real estate market after the pandemic
The reason why the drop projected by the ECB could be explained lies in the changes in trend produced in the real estate market after the pandemic. The same report published by the agency detailed that citizens Europeans are now opting for more spacious properties, where it is possible to work from home. Hence I know the price of the single family home increased in countries such as France, Belgium, the Netherlands and Luxembourg.
“Pandemic-induced changes in housing preferences could offset higher mortgage rates, and could explain some of the resistance that has been observed in the real estate market in the euro area”, the report collects.