More expensive mortgages, more limited loans... this is how the rise in interest rates will affect

The decision of the European Central Bank to raise interest rates again by 0.75% after the attack in July to curb entrenched inflation - 9.1% in the eurozone and 9.8% in the European Union according to July data- and putting an end to the cycle of expansionary policies will have consequences for families and businesses, although in aspects such as the granting of mortgage loans, consumers have been accepting for months the change in monetary course that the institution took last month of July. Mortgages become more expensive The measure will affect the upward revision of the monthly installments of variable-rate mortgages and in the case of fixed-rate mortgages, the conditions will be maintained, although those interested in opting for this modality will verify that the conditions are being tightening according to the strategy of the banking entities. Banks are the main beneficiaries of the revision in the variable rate, so for months they have been redirecting their offers to make this type of loan more attractive to the consumer, promoting them to the detriment of fixed rate loans to obtain greater profitability. To put the rise in context, from iAhorro they calculate that for a variable mortgage rate of 150,000 euros, contracted for 30 years and with a differential of 0.99% referenced to the average Euribor in the first week of September (1.893%), The monthly rise compared to the same month of 2021 implies climbing from 448.65 to 616.81 euros (168.16 euros more). In the accumulated figure for the year, the difference represents an extra 2,017.92 euros to pay for the mortgage in twelve months. In the case of a mortgage of 300,000 euros with the same conditions, the increase in installments compared to the Euribor of September 2021 would be 336.31 euros, placing it at 897.31 euros per month. Taking into account the total for the year, the increase would climb to 4,035.72 euros extra per year to pay the mortgage. Restriction of loans In addition to the Euribor, it is worth highlighting the tightening of loans, as stated in the latest 'Survey on Bank Loans in Spain'. Forecasts are not encouraging, and conditions are expected to continue to tighten in the coming months. This affects both consumers and businesses. In the case of families, the rise in prices and the loss of purchasing power has resulted in an increase in loans to cover expenses such as going back to school. "In general, they have increased between 50 and 80% depending on the sector, something much higher when compared to previous years", says the CEO and co-founder of Prestalo, Kristiffer Hanson. «Currently, in Prestalo, we are observing an increase in the request for micro loans, these are loans that range from 300 euros to approximately 5,000. A situation that was very different before, since the applications were focused on loans of over 5,000 euros, now the trend has changed“, indicates Hanson. Most vulnerable companies Taking into account the composition of the Spanish business fabric, where more than 90% of them are SMEs (small and medium-sized companies), the restrictions on credit as a result of the rise in interest rates are especially detrimental to their accounts . Even more so considering the effort they had to undergo during the pandemic to avoid closures and layoffs, leaving them in debt that will now cost more to refinance. The chief economist of Singular Bank, Alicia Coronil, also points out the added production costs involved in the increase in energy or raw materials, driven by the Ukraine war. For the economist, a possible measure to soften the effects would be to adjust public spending to maintain productivity and avoid second-round effects, that is, causing more inflation with measures that are not able to alleviate it and produce the opposite effect. Benefit for savings As interest rates increase, the profitability of bank deposits in the form of savings increases, so having money in an account will give more benefit to users who decide to open a deposit at their bank. Related News standard No The ECB undertakes a historic rise in interest rates of 0.75% to curb inflation Rosalía Sánchez The institution follows the pace of increases by the American Federal Reserve to curb inflation and the price of money is now at 1.25% It also benefits fixed income financial instruments or durable goods such as gold. That is, low-risk investments such as government bonds are now more attractive to investors.

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