The tide is perhaps turning. Eurozone mortgage interest rates have begun to rise, according to data just released from the European Central Bank.
The steady fall in the cost of borrowing for house purchases has been one of the less remarked upon economic trends of the past two years. But it has undoubtedly helped the eurozone’s economic recovery. Even in Germany – which avoided the property booms of the past decade – there are signs of the housing market picking up. With ten year fixed-rate mortgages available for less than 4 per cent, it makes sense to buy a house (especially if you are one of those Germans who fear galloping inflation is just around the corner). The pick-up has been even more pronounced in Paris. Read more
Europeans can borrow at record lows, too. More than two-thirds of euro-denominated loans freshly issued to households are at record lows, according to aggregated loan rates from the ECB.
During June, of 18 types of loan, 13 were agreed at the lowest rates since the series begin in 2003. Floating and <1 year fixed consumption loans — one category — dropped from 6.7 to 5.2 per cent in the month of June alone (red line on chart, right). This 1.46 percentage point fall was precisely double the next-largest fall of 0.73pp in 2005.
Comparable deposit rates rose during the same period, suggesting banks are being squeezed (see chart – note that this spread compares 1 year fixed deposit rates to floating and <1 year fixed loan rates – but it’s the closest match available from these data). That, as you will have guessed, is the narrowest spread on record, too.
Three out of the four categories of house-related loans are also at record lows: Read more
Eurozone mortgage borrowing surged last month to the highest level in almost two years in a sign that bank lending across the 16-country region may be flickering back to life.
Lending for house purchases rose at an annual rate of 3.4 per cent in June – the fastest since September 2008, according to European Central Bank data. The acceleration pointed to a revival in consumer confidence and an increased willingness by banks to fuel the economic recovery with loans to the private sector. Read more
If rumour is true, things are looking up for the 100,000 Hungarians more than 90 days past their mortgage due date. What’s left of Hungary’s international loan may end up in a mortgage-relief fund, intended to allow people to rent their homes, reports Reuters.
The new fund – reported in daily Magyar Hirlap and not yet confirmed by officials - would buy property (that would otherwise stand to be repossessed) from commercial banks, allowing mortgage-holders to rent the property. The paper also said that the bad loans of households would be replaced by state loans, though it did not name a source. Read more
The 30-year fixed rate mortgage rate in the US fell this week to a five month low of 4.93 per cent, according to Freddie Mac.
Mortgage rates had spiked above 5.20 per cent early last month, just after the Federal Reserve ended its $1.250bn plan hatched during the financial crisis to purchase mortgage-backed securities and support the housing market. Read more
Credit to household and non-financial corporations continues to shrink in Ireland.
Private-sector credit declined by €3.2bn in January. Last year, most of the declines were explained by debt revaluation. Not this year. The €3.2bn is transactions related – i.e. the difference between repayment and draw-downs. Read more
People in the UK are paying ever higher interest rates in comparison with the base rate, according to the Bank of England’s latest inflation report.
Data for the latest month shows an increase in credit card rates of 15bp with an equal and opposite decrease for personal loans, other rates being static. But the general trend is of widening spreads, as is clear from the second chart.
Spreads are widening between the rates charged on overdrafts, credit cards and personal loans (“consumer credit”) and the base rate. Rates charged on variable-rate mortgages (pink line) are historically wide, although not yet rising. (Experience in Australia suggests the spread will widen once the base rate begins to increase.)
The falling supply of consumer credit (green line, first chart) may help to explain rising rates Read more