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How the Rise in Interest Rates in 2022 Affects the Capacity to Buy a Home

How the Rise in Interest Rates in 2022 Affects the Capacity to Buy a Home - How the Rise in Interest Rates in 2022 Affects the Capacity to Buy a Home

The real estate market has undergone significant fluctuations in a short time, having a notable impact on the ability of many families to buy a home.

After the slowdown caused by the pandemic, the market is now facing an uncertain global economic and political situation: inflation unknown for years, an increase in the price of materials and construction costs, a low supply of housing for sale and an increase in rental prices.

And what's more: the rise in interest rates. In the eurozone, the price of money is becoming more expensive for the first time in eleven years, and it is doing so by 25 basis points. Furthermore, the European Central Bank (ECB) may approve a new rise in the coming months to contain inflation.

Interest rates and the ability to buy a home

The ECB's decision to raise interest rates, similar to what other central banks have already taken, will inevitably impact the property market. The general increase in prices already represents a loss of purchasing power and an obstacle to saving, two key factors when buying a home. Rising interest rates and higher mortgage prices will further reduce the ability to buy a home.

Many who had planned to buy and have not advanced their decision now face a double consequence. On the one hand, more difficulties in accessing housing finance. On the other, the need to deal with higher monthly payments or longer mortgages.

These circumstances will not only affect home buyers but also supply. Predictably, the growth in property demand experienced after the pandemic will stop. In an inflation and high-interest rates scenario, many people will wait until they have a small financial cushion that allows them to lower the loan. Another option would be to wait until they see how the situation evolves.

The result would be a cooling of the housing market. The forecasts point to a moderation in prices to adapt to the new circumstances. However, with more expensive mortgages and a lower capacity to buy a home, the number of sales transactions could start to drop.

Is it better to buy now or to wait?

At a time like the present, we recommend assessing calmly the decision to buy a house. Those looking for housing as a residence or investment have the alternative of lowering their expectations and opting for properties of smaller size or value.

Waiting for the evolution of the economic situation or the real estate market is not necessarily the best decision. Everything indicates that house prices, although with more containment, will continue to rise, and so will interest rates. There is still an opportunity to access attractive mortgage loans. In addition, the fear of such a slowdown in the market allows buyers to negotiate prices with sellers who want to sell their properties quickly.

Spainhouses.net helps you decide and find the home you need to make your dreams come true. On the portal site, you can check the evolution of prices by area and search among the best real estate offer. Find your opportunity now.

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