The rapid contraction of mortgage lending in Europe is a result of a jump in interest rates, which has caused financing costs to surge. This has led to a significant decline in demand for home loans, as they become increasingly unaffordable for many consumers. According to data from the European Central Bank, loans for house purchases fell below €5 billion in December, a 70% decline from the previous year. This is the first time home loans have fallen below that level since the onset of the Covid-19 pandemic almost three years ago. This decline highlights the tense situation in Europe’s market for residential real estate after the end of the era of cheap money. Consumers are now facing mortgage rates that have sometimes tripled over the past 12 months, making a home purchase unaffordable for many. This has led to a significant decrease in demand for mortgages, and a decrease in lending for house purchases. The market for residential real estate in Europe is now facing a lot of challenges, as interest rates have gone up, and consumers have less disposable income to spend on housing.
Inflation Hitting Mortgage Orginations
Rising food and energy costs are having a significant impact on the ability of Europeans to obtain mortgages. As the cost of living increases, many consumers are finding it more difficult to afford the higher monthly mortgage payments that come with rising interest rates. Additionally, the increase in food and energy costs can also reduce the amount of disposable income that individuals have available to save for a down payment on a home. This can make it more difficult for them to qualify for a mortgage or to afford the larger down payments that are often required by lenders. Overall, rising food and energy costs are putting additional financial strain on consumers, making it more difficult for them to afford a home and obtain a mortgage.