The Impact of Rising Interest Rates on Real Estate and Mortgage Loans

The interbank interest rate was around 8.25% in January 2018, but at the end of April 2023, it stood at 11.25%, a situation that has slowed down the purchase of real estate and mortgage loans.

Beautiful villa

In the last four years, the bank interest rate went from 8.25 percent to 11.25 percent, that is, 3 additional percentage points.

According to Banxico, the main tool that the institution has to try to contain inflation it is, precisely, to raise interest rates, even if this leads to an increase in the cost of credit and, therefore, may slow down economic activity.

In January 2018, the interbank interest rate was around 8.25 percent, but at the end of April 2023, it stood at 11.25 percent, according to the institution.

The former president of the Tabasco College of Economists (CET), Eduardo Estañol, opined that this type of adjustment causes bank credit to become more expensive and makes it difficult for companies to resort to leverage to reactivate their establishments or businesses.

“This situation affects companies that need to borrow money to carry out their investments, governments that need to finance public spending, and also affects people who require loans to buy a house, a car or finance an unforeseen expense” , indicated.

However, for the professional this type of adjustment has a logical explanation: “All countries –both in the industrialized world and in the developing world– are suffering the effects of the crisis. Already since the last year of 2018, the advanced economies show a reduction or fall in their levels of production and employment”.

For example, between 2018 and the first two months of 2023, according to the Banxico indicators consulted by Novedades de Tabasco, the amount of credit placement for the purchase of homes or the so-called mortgage loan had a reduction from 14 thousand million pesos to only 12 billion pesos, and this has to do with the increase in interest rates.

In this sense, the president of the Mexican Association of Real Estate Professionals (AMPI), Florencia Estrada Lázaro, stated that at this time it is not a business to acquire or request mortgage loans, because interest rates at an amount of 11.25 percent are expensive.

Banxico decision

The head of the Bank of Mexico (Banxico), Alejandro Díaz de León, said that interest rates and the exchange rate remain at relatively high levels, amid persistent inflationary pressures that led the entity on Thursday to raise its interest rate. reference.

Data

Bank Interest Rates (TIE)

2018: 8.25%

2023: 11.25

Increment: 3%

Placement of mortgage credit in Tabasco

2018: 14 mmdp

2023: 12 mmdp

Reduction: 3 billion dp

Fuente: Banxico, Economists