After a long run of high inflation rates in the 2022 Philippine market, the Philippine Statistics Authority has noticed a well-received trend of lower inflation in the past few months. From its peak rate of 8.7% in January of 2023, it has now cooled to a 5.4% in June, prompting more stable prices for different goods and services across the country Compared to the rates of June 2022 where inflation was at 6.1%, this shows a more promising trend of stabilization wherein individuals have opportunities to assess the possibility of more affordable mortgages and home loans.
Lower Interest Rates for Enhanced Affordability
A downward trend in inflation paves the way for affordability among Filipinos, given that cost of goods and services becomes more accessible. From a borrower's perspective, the deceleration in current local inflation allows for lower interest rates as financial institutions encourage the population to borrow and boost economic growth. Therefore, mortgages and other loans become more accessible as their interest rates are likewise lowered—leading to smaller monthly mortgage payments.
Housing prices may also decrease in the case of low inflation, mirroring the other goods and services bought by the individuals. Given that one's purchasing power has more stability in this circumstance, housing becomes more affordable for potential buyers. Such can encourage more individuals to enter the housing market and seize the opportunity before inflation rises once again.
Increased Demand for Mortgages
Should inflation continue at this lowered rate, more and more interested homeowners can then begin to actualize the potential to own property. This opens a consideration to reassess the budgeting from one's source/s of income and allocate a specific portion to servicing a mortgage. As the cost of goods is stable and not drastically increasing, the reduced financial anxiety makes it an appealing possibility for new borrowers to open accounts. This increases the demand for mortgages, as people have the monetary allocation to meet their monthly mortgage payments and lower the risk of default. Moreover, low inflation can enhance the overall creditworthiness of a potential borrower, making it all the more appealing as they would be more likely to secure housing loans with favorable terms.
Relaxed Loan Qualifications for Lenders
Local Philippine financial institutions may execute an initiative to boost spending and investment within the country by loosening monetary and lending policies for their borrowers. The result would be a more relaxed borrowing criteria that would make it easier for individuals to qualify for housing loans. Individuals who might have been considered risky borrowers during high inflation periods might find it less challenging to secure loans in a low inflation environment.
Opportunity for Long-term Loans
Low inflation can influence the borrowers' decisions and lenders' offerings, potentially leading to an increased preference for longer-term loans. There is less pressure for lenders to increase their interest rates, and some financial institutions may be keen on arrangements that are more accessible to individuals. A longer-term loan with lower fixed monthly payments allows borrowers to spreading their mortgage payments over an extended period and reduce their monthly financial burden. Filipinos may also be able to allocate more of their income to other purposes, such as personal savings or pursuing additional investments.
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The trend of lower inflation rates proves to be an opportunistic time for borrowers in the Filipino market. Given that the local economy has gone through a period of uncertain times and soaring prices, the stabilization of an inflation rate allows individuals to consider the possibility of purchasing property—ultimately building a home and future for themselves.