As central banks around the world struggle to calm down wave of inflation As economies do not enter a violent recession, the next crisis appears to be exploding in the housing market. with all Increase in interest rates Interest in mortgages is on the rise, which is pushing down demand, which has already suffered a long string of crises since the outbreak of the Corona pandemic.
Away from the Chinese economy, where the real estate sector controls around 30% and suffers from suffocating crises, the mortgage market in America is witnessing a state of turbulence with rising interest rates on real estate loans, which has pushed some buyers to withdraw from home purchases, as inflation and high prices spewed Interest is a heavy shadow on the housing market in the US market, which is witnessing the highest rate of cancellation of sales contracts since the beginning of the Corona pandemic in 2020.
was US central bank It raised the interest rate by 75 basis points last June after raising it by 50 basis points in May, as well as a 25 basis point increase last March. According to a new report from Redfin, about 15% of home sale deals were canceled in June. This percentage was 11% a year ago, as the fixed interest rate on the 30-year mortgage was at the beginning of the year at 3% and then briefly rose above 6% in mid-June before stabilizing at 5, 75% at the present time. The cost of owning a median-priced home is about 32% of the median wage in the United States, up from 24% a year earlier.
—
At the same time, according to a recent report, markets in Australia, Canada and Europe are facing falling house prices, while business specialists believe it is the beginning of an economic downturn. The real estate market will experience a global slowdown in 2023 and 2024, says Hideaki Hirta, a former Bank of Japan economist and co-author of an IMF paper on global house prices.
The high cost of real estate financing has affected economies in several ways, as rising mortgage payments have discouraged potential buyers from entering the market, which will be reflected in the boom in property prices. The current slowdown is a sharp turnaround from the boom fueled by central bank lending policies in the years following the financial crisis, and then through the pandemic, which has prompted many to seek homes with more space.
A Bloomberg report revealed that borrowers’ exposure to high rates varies by country. For example, in the United States, most objectors rely on fixed-rate home loans for up to 30 years, and adjustable-rate mortgages have accounted for, on average, about seven percent of loans over the past five years.
Conversely, in other countries, loans are generally fixed for a period of at least a year or variable mortgage loans are closely aligned with official interest rates and variable loan rates were higher in Australia, Spain, the UK and Canada in 2020 According to Fitch Ratings, Australia, Spain, the UK and Canada had the highest concentration of floating rate loans as a share of new business in 2020, according to Fitch Ratings.
central banks
“If central banks tighten too much, the potential for a soft landing decreases and house prices could fall more rapidly, exacerbating and prolonging the recession,” says Bloomberg Economics’ Neeraj Shah.
In some countries, governments have already taken action to help stressed consumers cope with rapid escalation of payments. In South Korea, one of the first economies in the Asia-Pacific region to start raising interest rates, politicians have finally decided to spend over 400 billion won ($ 290 million) in funds to help reduce households’ share of variable rate mortgages.
And in Poland, where monthly payments to some borrowers have doubled as interest rates rise, the government intervened earlier this year to allow Poles to suspend payments for up to eight months. The move wiped out the profits of major banks after the industry was forced to book around 13 billion zlotys ($ 2.78 billion) in provisions.
In Sweden, once one of Europe’s hottest markets in terms of real estate demand, house prices have fallen by around 8% since the spring and most economists are now forecasting a 15% decline.
Read more
This section contains related articles, entered in the Related Nodes field.
–
As China faces a growing real estate crisis linked to a wave of defaults from major real estate developers, borrowers have withheld mortgage payments for unbuilt homes. Data from the People’s Bank of China showed that home loans accounted for just over a quarter of China’s bank credit at the end of June, and mortgages remain a high-quality asset on the bank’s balance sheet compared to damaged business loans.
Harry, a senior director of S&P Global Ratings, says two-thirds of the 35 listed regional banks that disclosed the information saw an increase in their non-performing loans to property developers in the first six months. For example, Jinzhou Bank in Northern Liaoning Province had the highest rate of bad loans for developers, reaching a level of 10.37% at the end of June, compared to 9.77% at the end of last year and almost. double the level in 2020.
bad loans
The percentage of non-performing loans exposed to the construction sector, mainly subcontractors of construction sites, amounted to approximately 9.39 percent, compared to approximately 7.78 percent at the end of 2021. Jinshang Bank of Taiwan, the capital of Shanxi province in northern China, it was hit hard, which caused its lending to the construction sector to decrease. Home builders also increased non-performing loans to 10.29%, an increase of 10.01 percentage points from to 2020.
By comparison, the average ratio of non-performing loans among commercial banks was 1.67% and bad loans owed by homebuilders are likely to continue to rise as China’s real estate sector moves from crisis to crisis and 21 major developers default on their unmanageable investments. debt last year, especially The China Evergrande Group, the average ratio of Chinese banks’ non-performing loans in the real estate development sector will rise to 5.5% by the end of the year, compared to 2.6% at the sector level at the end of the year. beginning of the year.
–
