European default rates to increase between 3.75% and 5.5% as borrowing costs rise.

According to S&P Global, higher interest rates and a nearly stagnant European economy would strain the region's businesses, real estate companies, and banks' credit ratings and increase the default rate.

The rating agency stated in a recent study that as financing circumstances become more restrictive, "the trend in credit quality is turning negative for corporates, especially for speculative-grade issuers."

"One of the industries with the most exposure is real estate. Credit losses for European banks are anticipated to merely normalise, the survey said, notwithstanding the emergence of deteriorating asset quality.

S&P predicted that the proportion of "speculative-grade" or junk-rated companies would steadily rise from 3.4% in August to 3.75% by June 2024.

According to Paul Watters, the organization's head of European corporate research, it may reach 5.5% if the area experiences a terrible recession.

Companies and consumers now need to refinance at significantly greater rates than they were used to over the last ten years due to the quick increase in global interest rates over the previous 18 months.

Currently, "negative outlooks"—effectively downgrade warnings—are present on the ratings of over half of the 60 European real estate businesses and REITs that S&P evaluates.

(Sources: investing.com, reuters.com)