By Ovunc Kutlu
ISTANBUL (AA) - Fitch Ratings said on Thursday indebted households will not see an immediate improvement in their debt burden until 2025 at the earliest, even as central banks begin to lower interest rates this year.
Rising interest rates in the last two years have increased the cost of borrowing around the world, "but there are cross-country differences, primarily reflecting differences in mortgage markets," the rating agency said in a statement.
"Where long-term fixed-rate loans dominate, such as in the US, Germany and France, households have been fairly sheltered from rising interest rates."
"By contrast, in countries that have a greater share of variable-rate loans, such as Australia or Spain, or shorter fixes, such as the UK and Canada, the effective interest rate has risen more sharply, pushing up households’ interest service burden," it added.
While central banks are expected to cut rates later this year, Fitch said it forecasts households' burdens are close to their peaks in some developed markets, such as Australia, Italy and Spain, adding: "But in others, including the US, the adjustment to higher interest rates has barely started."
The agency said it does not expect a return to very low interest rates, thus indebted households are anticipated to pay more in interest as a share of income compared to the past.