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| Mortgage payments will affect consumption until 2030 |
| Frankfurt am Main, 19.06.2025 |
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| Rising mortgage payments will weigh on consumption in the eurozone for the next five years. This is despite the fact that the European Central Bank (ECB) has already significantly reduced its interest rates last year. This was shown on Wednesday by an ECB study. TASR reports this based on a Reuters report.
The ECB has cut borrowing costs for the eighth time in a row this month in an effort to support the sluggish eurozone economy. Its key rate is currently at 2%.
However, according to the ECB study, mortgage borrowers are paying their share for the central bank's previous struggle with high inflation. The ECB has raised its key deposit rate relatively quickly, from -0.5% to 4% in just over a year. This has also been reflected in commercial bank lending rates. This has led to an increase in the proportion of home loans that initially had a fixed interest rate but gradually increased, leading to higher monthly payments, until around 2030.
The authors of the study expect this to further dampen consumption, despite the ECB’s ongoing monetary easing cycle.
They estimate that the ECB’s rate hike will reduce consumption growth by 1 percentage point by 2030, with around a third of this effect still to come.
The effect will be stronger for poorer households, who tend to have variable-rate mortgages.
One in four households in the euro area has a home loan.
Variable-rate mortgages are prevalent in Spain and, to a lesser extent, Italy, while French and German borrowers are more likely to have secured a fixed rate for a certain period of time.
The share of fixed-rate mortgages generally increased after the global financial crisis of 2008-2009, when many households struggled to make their monthly payments.
This, on the one hand, dampened the immediate impact of the ECB's rate hikes, but also prolonged their duration.
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