Interest rate hikes fail to cool property boom

4th April 2006, Comments 0 comments

4 April 2006, MADRID — Higher interest rates have failed to dampen Spaniards' desire to become property owners, new figures reveal.

4 April 2006

MADRID — Higher interest rates have failed to dampen  Spaniards' desire to become property owners, new figures reveal.

Mortgage loans rose 37.7 percent in the first month of the year, compared with January 2005.

The European Central Bank raised its interest rate for the first time in December, with the second rate hike announced last month.

The ECB current rate stands at 2.5 percent.

The Bank of Spain criticised the ECB policy calling it "expensive".

But the Spanish government is worrying more about how much Spaniards are getting themselves into debt with mortgages.

This concern comes as interest rates are going up and other inflationary concerns are increasing.

The National Institute of Statistics said 98.3 percent of home loans are bought with a variable rate mortgage.

But the government wants families to move to mixed mortgages to reduce the effects of a possible downtown in the property boom and a dip in the Spanish economy which would plunge many into negative equity.

The average mortgage in January was EUR 145,000, up 16.8 percent from a year earlier.

[Copyright EFE with Expatica]

Subject: Spanish news    

0 Comments To This Article