From Bloomberg, we have news about India: India's Mortgage Borrowers Face the Big Squeeze.
The Indian central bank's monetary shock therapy has left the country's newly leveraged middle class gasping for breath.
Last weekend, ICICI Bank Ltd., which commands a 30 percent share of retail lending in India, raised the benchmark interest rate on all floating-rate loans, including mortgages, by 1 percentage point to 12.75 percent.
This move came on top of a similar increase in February, and a half-percentage-point one in December.
A new homeowner who took out a 2 million-rupee ($46,200), 15-year variable-rate mortgage, say, two months ago was better off as a tenant. His loan's maturity, according to ICICI Bank's ``impact calculator,'' has increased by about eight years.
A 200-basis-point increase in a mortgage rate in less than two months is unbearable even in a high-wage-growth country such as India. It translates into a 20 percent jump in what a family has to pay the bank every month, according to Credit Suisse Group research.
A 20% jump in payment is a disaster. The impact on retail has to be breathtaking.
Where are all the analysts who were predicting that Indian consumers would take over where the US left off?
Of course, this blog had already predicted this in: Hello, Deflation!, and The Goldilocks Economy.
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