Rising Interest Rates could Disturb Home Prices in Europe



The economy in Europe is facing a challenging time as the International Monetary Fund (IMF) warned that the housing market in the region could change "out of order" last week.

The economy in Europe is facing a challenging time as the International Monetary Fund (IMF) warned that the housing market in the region could change "out of order" last week. With central banks continuing to raise interest rates to reduce inflation, mortgage payments could increase, leaving borrowers with less money for consumption and, in some cases, unable to repay their credit loans.

Rising Interest Rates could Disturb Home Prices in Europe

The European Statistics Office (Eurostat) shows that house prices have already begun to decline, with a decrease of 1.5% in Q4/2022 compared to the previous three-month period. The economy is under pressure from the ECB's raised interest rates, which are currently at 3%, and it is unlikely that this will improve in the near future. The IMF predicts that overall inflation in the euro area will average 5.3% this year and 2.9% next year, well above the European Central Bank's target of 2%.

Sweden has also seen a significant decline in house prices, leading to inflation forecasts that suggest the country's central bank may need to raise interest rates. The same situation is playing out in the UK, with overall inflation set to reach 6.8% this year and 3% in 2023.

The IMF has made it clear that central banks have no choice but to conduct further rate hikes. "Higher and potentially more persistent inflation will require tighter monetary policy until core inflation returns to the target level set by central banks," the agency said. 

The situation in Europe regarding inflation and the housing market is complex, and measures to reduce inflation must be taken to prevent further harm to the economy. The rise in inflation makes it difficult for central banks to make sound decisions, and it is essential to take into consideration the impact of these decisions on consumers. In the face of these challenges, it is essential to develop an agile and innovative economic policy, which takes into consideration various factors and enables swift adaptation to emerging economic situations.

Rising Interest Rates could Disturb Home Prices in Europe

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