Variable rate mortgages with rising payments

Variable Rate Mortgages: How ECB’s Rate Hike Impacted Borrowers and Financial Stress

According to CRIF’s analysis, in January 2022, 26% of active mortgage loans were at a variable rate. The most significant impact of the ECB’s rate hike was on the average installment of these loans, which increased by an average of +36% compared to mid-2022. The peak increase was +49% for mortgages disbursed in the last five years.

The CRIF analysis revealed that despite borrowers making 24 installments between January 2022 and December 2023, there was a +25% increase in overall debt levels among those with variable rate mortgages over the past five years. Although adjustable rate mortgage borrowers did not show an increase in insolvency rates, there was a notable rise in financial tension as indicated by CRIF’s financial tension index, which showed higher levels of indebtedness and a risk of failure among borrowers with variable rate mortgages.

Simone Capecchi, Executive Director of CRIF, commented on the impact of interest rate dynamics on variable rate borrowers over the past two years. While there has not been a significant increase in insolvency rates, there has been a notable rise in financial stress. The potential for a rate cut in June 2024 could provide relief for borrowers and help stabilize their financial situations.

With current macroeconomic and geopolitical uncertainties, it is crucial to remain vigilant and prepared to face any challenges that may arise in the future.

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