European Property Market Awaits Action From The E.C.B.
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Neil Ebsworth
May 7, 2013, 8:50:03 AM5/7/13
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Article Title: European Property Market Awaits Action From The E.C.B.
Author: Neil Ebsworth
Word Count: 584
Article URL: http://www.isnare.com/?aid=238534&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=238534
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The Federal Reserve in the United States has now cut their prime interest rate three times in as many weeks in an attempt to stave off a recession that many believe has already arrived. Unfortunately the US Real Estate market, which is dominated by long term fixed rate mortgages will not benefit from these cuts in the same way as home-owners in European countries do.
The problem lies in the historic nature of mortgage lending which varies considerably in the US from the standard model used across Europe. In the US it is commonplace to take out a mortgage with a twenty-five year fixed rate at the time of purchase, rather than rely on the fluctuating standard variable rate mortgage that is more commonplace in the UK and across Europe.
The resulting affect of an interest rate cut in the UK would immediately see a benefit to existing home-owners in terms of lowering their monthly repayments, whereas in the US a rate cut only provides a stimulus to new borrowing that can be now be obtained a the new, lower rate. Whilst this makes first time borrowers more likely to step into a weak real estate economy, the total affect has less of an impact on consumer spending than a similar rate cut by the E.C.B. or the Bank of England.
One thing is certain though. A recession in the US is very bad news for the global economy and whilst the sub-prime credit crisis which originated in the US may have little direct effect on the economies in Europe, the knock-on effect of a US recession has historically seen recession across the major economies around the world.
The question is then, why are the European Central Bank and the Bank of England refusing to move on interest rates? Surely a cut in the E.C.B rate would take pressure off the dollar which in turn would have a positive affect on the price of oil and help cut rising energy costs across the globe. It would also stimulate both the british and European property sectors, who are currently balancing of the knife edge of a collapse that hasn�t been seen in the UK since 1989.
Maybe the European Union is too diverse an economy and it is this, that is holding back the E.C.B. from action. It has always been asserted that the lack of mobility of labour in the E.U. could be a source of keeping the economies of the members on different inflationary paths, making it difficult for the central bank to act decisively on interest rate policy when by doing so, one members economy may benefit to the detriment of another. By doing nothing however, the ECB stand the risk of pushing the property sectors in many countries into decline. It can already be seen in markets such as Spain, where any fresh impetus from overseas buyers due to recent falls in property prices, has been extinguished by the strengthening Euro against the pound. As British buyers make up over 65% of this holiday property market, the nullification of any price adjustments has dampened what was already a pretty �wet� market.
What, if any, action is taken by the E.C.B. will have to wait until they meet again at the beginning of April . Until then, it can be assumed that the longer they delay, the worse the overall slowdown may become.
About The Author: Neil Ebsworth is the founder of AMLASpain, the Spanish MLS for property for sale in Spain,(http://www.amlaspain.com ) and rentals Spain, (http://rentals.amlaspain.com )
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=238534
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Message delivered directly to members of the group:
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Please consider this free-reprint article written by:
Neil Ebsworth
*****************************
IMPORTANT - Publication/Reprint Terms
- You have permission to publish this article electronically in free-only publications such as a website or an ezine as long as the bylines are included.
- You are not allowed to use this article for commercial purposes. The article should only be reprinted in a publicly accessible website and not in a members-only commercial site.
- You are not allowed to post/reprint this article in any sites/publications that contains or supports hate, violence, porn and warez or any indecent and illegal sites/publications.
- You are not allowed to use this article in UCE (Unsolicited Commercial Email) or SPAM. This article MUST be distributed in an opt-in email list only.
- If you distribute this article in an ezine or newsletter, we ask that you send a copy of the newsletter or ezine that contains the article to http://www.isnare.com/eta.php?aid=238534
- If you post this article in a website/forum/blog, ALL links MUST be set to hyperlinks and we ask that you send a copy of the URL where the article is posted to http://www.isnare.com/eta.php?aid=238534
- We request that you ask permission from the author if you want to publish this article in print.
The role of iSnare.com is only to distribute this article as part of its Article Distribution feature ( http://www.isnare.com/distribution.php ). iSnare.com does NOT own this article, please respect the author's copyright and this publication/reprint terms. If you do not agree to any of these terms, please do not reprint or publish this article.
*****************************
Article Title: European Property Market Awaits Action From The E.C.B.
Author: Neil Ebsworth
Word Count: 584
Article URL: http://www.isnare.com/?aid=238534&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=238534
Easy Publish Tool: http://www.isnare.com/html.php?aid=238534
*********************** ARTICLE START ***********************
The Federal Reserve in the United States has now cut their prime interest rate three times in as many weeks in an attempt to stave off a recession that many believe has already arrived. Unfortunately the US Real Estate market, which is dominated by long term fixed rate mortgages will not benefit from these cuts in the same way as home-owners in European countries do.
The problem lies in the historic nature of mortgage lending which varies considerably in the US from the standard model used across Europe. In the US it is commonplace to take out a mortgage with a twenty-five year fixed rate at the time of purchase, rather than rely on the fluctuating standard variable rate mortgage that is more commonplace in the UK and across Europe.
The resulting affect of an interest rate cut in the UK would immediately see a benefit to existing home-owners in terms of lowering their monthly repayments, whereas in the US a rate cut only provides a stimulus to new borrowing that can be now be obtained a the new, lower rate. Whilst this makes first time borrowers more likely to step into a weak real estate economy, the total affect has less of an impact on consumer spending than a similar rate cut by the E.C.B. or the Bank of England.
One thing is certain though. A recession in the US is very bad news for the global economy and whilst the sub-prime credit crisis which originated in the US may have little direct effect on the economies in Europe, the knock-on effect of a US recession has historically seen recession across the major economies around the world.
The question is then, why are the European Central Bank and the Bank of England refusing to move on interest rates? Surely a cut in the E.C.B rate would take pressure off the dollar which in turn would have a positive affect on the price of oil and help cut rising energy costs across the globe. It would also stimulate both the british and European property sectors, who are currently balancing of the knife edge of a collapse that hasn�t been seen in the UK since 1989.
Maybe the European Union is too diverse an economy and it is this, that is holding back the E.C.B. from action. It has always been asserted that the lack of mobility of labour in the E.U. could be a source of keeping the economies of the members on different inflationary paths, making it difficult for the central bank to act decisively on interest rate policy when by doing so, one members economy may benefit to the detriment of another. By doing nothing however, the ECB stand the risk of pushing the property sectors in many countries into decline. It can already be seen in markets such as Spain, where any fresh impetus from overseas buyers due to recent falls in property prices, has been extinguished by the strengthening Euro against the pound. As British buyers make up over 65% of this holiday property market, the nullification of any price adjustments has dampened what was already a pretty �wet� market.
What, if any, action is taken by the E.C.B. will have to wait until they meet again at the beginning of April . Until then, it can be assumed that the longer they delay, the worse the overall slowdown may become.
About The Author: Neil Ebsworth is the founder of AMLASpain, the Spanish MLS for property for sale in Spain,(http://www.amlaspain.com ) and rentals Spain, (http://rentals.amlaspain.com )
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=238534
*********************** ARTICLE END ***********************
- To distribute your articles go to http://www.isnare.com/distribution.php
- For more free-reprint articles go to http://www.isnare.com
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