Summer has arrived, the forecast for the peak tourist season is excellent and most people’s holidays are right around the corner, if they haven’t already started.

However, for many families in the province of Malaga, serious storm clouds loom on the horizon as something resembling a perfect storm threatens the domestic economy of thousands of households, besieged by the constant increase in their daily expenses.

The indicators are at their highest: prices are rising by 10.2%, the highest inflation rate in 37 years; Euribor (which sets interest rates for most variable-type mortgages) ended June higher than it had been in the past ten years.

Fuel prices have risen by more than 50% in the last year and are now over two euros per liter and electricity bills have become a real nightmare for families and businesses.

Price escalation has continued for basic items such as the Weekly Store, Power and Fuel, and analysts agree that caution will be needed in the near future, with the ongoing war in Ukraine and uncertainty about what might happen in the coming months. .

“In the first quarter of this year, people started buying less in Andalucia and in Spain as a whole, because the prices of most of the items they normally buy have risen so much.

“In this scenario, which is expected to last until the second half of this year, further adjustments may be necessary, especially for low-income families and businesses that have been most affected by the Covid-19 crisis” , says José Antonio Muñoz of Analistas Económicos de Andalucía, the Grupo Unicaja Banco company that carries out studies.

The rising cost of food purchases also worries the president of the Consumers Association of Malaga, Jesús Burgos:

“The CPI (consumer price index) includes the rise in price of many items, but if shoes cost more, as it’s something you only buy once in a while, it’s not not the same as bread, which you buy almost daily.

The real problem is the cost of food, as all the basic things people normally buy have gone up in price: meat, fish, fruits and vegetables, bread, etc. “, he explains.

“Our analyzes show that a small family spends on average between 30 and 40 euros more on basic groceries than a year ago for the same things, and it seems that prices will continue to increase,” he says. .

Ride at the same time

“A lot of things get more expensive at the same time, that’s the problem,” says Jesús Burgos of a situation thousands of families face when they have to go to the supermarket, fill up the car and pay the electricity bill.

According to its forecasts, Analistas Económicos de Andalucía does not expect an improvement in the short term:

“The June inflation data, which was the highest in 37 years (10.2% YoY) and the trend so far suggest that prices will continue to rise in the months ahead.

However, there should be a strong moderation from the second half of 2023,” they say.

Rising food, fuel and energy costs add to mortgages, with Euribor at its highest level in a decade. In practice, this means a noticeable increase in monthly mortgage payments for those with variable interest rates.

To give two examples, for a variable rate loan of 150,000 euros over 30 years, the monthly payment will increase by around 90 euros, or more than 1,000 euros per year.

For a loan of 300,000 euros, the monthly payment will increase by just over 180 euros per month, or more than 2,010 euros per year.

A cruel paradox

What is ironic about this situation is that mortgages became more expensive because the European Central Bank let slip that it would raise interest rates after the summer to slow the rise in inflation.

In other words, the ECB wants to curb the rise in prices but its first effect is to make mortgage repayments more expensive, because the money lent will be at a higher interest rate.

“The mere threat of an interest rate hike by the ECB sent mortgages soaring. We have gone from a negative index of minus 0.5% at the start of the year to an expected 1% more soon .

This point and a half means that reimbursements will increase considerably.

If that was all that happened, families might cope better, but the problem is that it comes on top of all these other increases,” says José Manuel Fernández of the Mortgage Credit Union (UCI).

And the short-term predictions for this aspect are not good either.

“There is every reason to believe that Euribor will continue to rise, at least over the next few months, and this is very bad news for people with variable rate mortgages,” says Miquel Riera, head of mortgages for the Helpmycash specialized portal.

More expensive mortgages

“Most of the mortgages already granted will increase, but so will those approved in the future,” warns Riera.

“Banks have been offering more expensive mortgages since February. At the beginning of this year it was relatively easy to find one at 1.5% and now the majority are around 2%.

“Banks will also be more demanding with their customers, will ask for more solvency, more job stability,” he said.

This half-empty glass for the household savings of thousands of families may offer a half-full side if the forecasts of analysts such as Fernández and Riera come true, which include a stabilization in the sale price of properties.

If loans are more expensive and buyers have less money, it would make sense that prices would at least stop rising. “The rise in prices will moderate, as demand is likely to slow down or even fall,” says Riera.

The exception of Malaga

This could be another case of the so-called ‘Malaga exception’. “In regions like Malaga, Barcelona and Madrid, it is more difficult to forecast in this way, because the demand from international buyers is more assured,” explains Riera.

This means that Malaga could maintain a situation that already exists and which also applies to inflation: the cost of property increases more in this province because the demand is much higher, in many cases due to foreign tourism.

However, these visitors bring with them the promise of a better summer for the local and regional economy, with the consequent effect on employment and businesses, particularly in the service sector.

“All forecasts agree that the tourist season for the province of Malaga and the rest of Andalusian costs will be excellent,” say sources at Analistas Económicas de Andalucía, “with a very positive contribution to economic growth. the scenario is not as dynamic as it was believed earlier this year, it is hoped that the economies of Malaga and Andalusia will maintain a gradual growth and that this will stabilize once the causes of the uncertainty are reduced .”

This uncertainty casts a shadow on the economic horizon of thousands of Málaga families, just as summer is knocking on the door.

is the year-on-year inflation rate for June. This is the highest figure in 37 years and is marked by the rising cost of basic foodstuffs and fuel

is the average increase in the cost of fuel most often used by individuals. The rise is in the last year and that means the cost of a liter of fuel is now over two euros, everywhere

was the Euribor rate at the end of June. This is the highest rate of the last decade and can increase the repayments of an average mortgage (150,000 euros over 30 years) by 1,000 euros per year.