Proceedings of the 7th International Conference on Advanced Research in Management, Business and Finance, 2024
Year: 2024
DOI:
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Mortgages and Generation Z: The Clock Ticks on Rates
Geoffrey Ditta, Briony Campbell
ABSTRACT:
Excessive access to credit has led to families being overly indebted, resulting in social problems, defaults, foreclosures, and evictions. This study aims to demonstrate that the mortgage industry will gradually decline with Generation Z. In Europe, and more specifically in the Kingdom of Spain, the country selected for this research, the variable interest rate for mortgages is typically pegged to an official index, the Euribor. In Spain, many loans have variable rates; thus, a rising Euribor significantly impacts the most vulnerable families, consequently posing a macroeconomic risk. This paper employs quantitative and economic data on granted mortgages. The results indicate that Generation Z, born after 2000, is likely to increasingly avoid long-term mortgages. In 1991, inflation was under 2 percent, and it has averaged around 2 percent over the last decade. People generally do not opt for a variable rate unless they are prepared for rate volatility. The European Central Bank has struggled to maintain inflation within a 0 to 2 percent interest rate range, and another rate hike is possible. Additionally, inheritance rates have hit record highs. Given the demographic trend of slowing population growth, particularly in Spain, which has one of the world’s lowest fertility rates at 1.4 children per woman in 2023, this trend is expected to continue.
keywords: Inflation, variable-rate, volatile, debt, consumer