Interest Rate Forecast and Its Impact on the Real Estate Market
Mortgage rates in Europe have experienced a number of changes in recent years, with a significant increase in 2022 and a gradual decline in 2023. What can we expect for mortgage rates in 2024?
Current Trends in Mortgage Rates in Europe
Increase in Mortgage Rates in 2022
In 2022, mortgage rates in Europe experienced a significant increase, driven by a number of factors, such as inflation, the war in Ukraine, and the rise in interest rates in the United States. In Spain, for example, the average rate for variable-rate mortgages rose from 1.25% in January 2022 to 2.50% in December 2022.
Gradual Decline in Mortgage Rates in 2023
In 2023, mortgage rates in Europe began to decline gradually, driven by a number of factors, such as the decline in inflation, the end of the war in Ukraine, and the expectation that central banks in the euro zone would lower interest rates in 2024. In Spain, for example, the average rate for variable-rate mortgages fell from 2.50% in December 2022 to 2.25% in December 2023.
Interest Rate Forecast for 2024
According to a recent publication by UBS, the Swiss National Bank (SNB) will gradually cut interest rates starting in June 2024. This analysis is based on a number of factors, such as the fall in Swiss mortgage rates and Swiss government bond yields in November and December 2023, which was largely expected due to market expectations that the Swiss National Bank (SNB) would lower interest rates in 2024. In addition, inflation figures published at the end of 2023 in the United States and Europe were weaker than expected. The lower inflation gives central banks in industrialized countries, including the SNB, some leeway to lower interest rates more quickly in the first half of 2024.
Impact of Interest Rates on the Real Estate Market
Changes in interest rates have a significant impact on the real estate market. Lower interest rates make mortgages more affordable, which can lead to an increase in demand for housing and an increase in prices. Conversely, higher interest rates make mortgages less affordable, which can lead to a decrease in demand for housing and a decrease in prices.
Conclusion:
Overall, it is expected that mortgage rates in Europe will continue to decline in 2024. This could lead to an increase in demand for housing and an increase in prices. However, it is important to note that real estate markets are complex and that other factors, such as inflation, the economy, and politics, can also influence housing prices.