Mortgages are becoming rapidly more expensive around the world. This is the result of the war in Iran
As the newspaper explains, commercial banks react in this way to the rising costs of state debt and bet that official interest rates will eventually have to rise to quell recurring inflation.
Read also: Reorganization and investments of Ikea in Poland. Jakub Jankowski about the future of the company
USA: the end of cheap money and Trump's efforts thwarted
In the United States, the conflict pushed the average interest rate on a 30-year mortgage to 6.36 percent. This is higher than in September 2024 – before the Federal Reserve (Fed) began a series of three rate cuts.
The situation is difficult because even before the outbreak of the war, the American market was struggling with a huge housing deficit, which was the result of a decade of limited construction investments.
Donald Trump's administration tried to save the situation and artificially lower mortgage rates through the intervention purchase of bonds by government agencies Fannie Mae and Freddie Mac. However, as analysts point out, the effects of these actions were quickly “swamped” by the market effects of the war and the blockade of the Strait of Hormuz.
Brokers building the US market also notice a psychological change among clients. Many of them are beginning to come to terms with the fact that 2% rates, known during the pandemic, may never return in their lifetime.
Europe: Germany is counting additional costs, Great Britain is the worst hit
In the euro zone, the German economy took the biggest hit. The interest rate on 10-year loans, popular in Germany, increased by about 0.3 percentage points to 3.6 percent in a few weeks.
Read also: Inflation in Poland is rising due to the war in Iran. Interest rate cuts are becoming less and less realistic
As analyzed by the Financial Times, this means a real drain on the wallet for the average borrower. In the case of a new loan for the amount of PLN 350,000. euro, the annual cost of interest alone increased by PLN 1,000. euro (up to nearly EUR 13,000 per year). This caused considerable concern on the market and a sudden rush by people who want to finalize contracts before the next increases.
However, the most drastic jumps were recorded in Great Britain. There, the average interest rate on two-year fixed-rate loans (with a 25% own contribution) increased from 3.97%. at the end of February until 5.1 percent in April. Experts from Knight Frank Finance assess this as a “powerful blow to the purchasing power of the British.”
The specter of stagflation hangs over the world
Economists and investors warn: this may be only the beginning of problems. If a key oil route in the Middle East remains blocked, central banks will be forced by the market to raise interest rates to combat rising energy prices.
— The risk of miscalculation between Trump and the Iranian leadership is growing, warns John Muellbauer, an economist at the University of Oxford, in an interview with the newspaper. In his opinion further escalation of the conflict may push the global economy into a scenario of serious stagflation (simultaneous high inflation and economic stagnation). On the real estate market, this will undoubtedly translate into a decline in the number of transactions and a strong downward pressure on the prices of apartments themselves – it all depends on how long the fighting in the Middle East will last.
