• Thu. Apr 25th, 2024

ECB’s Rate Hike Causes Increase in Variable Rate Mortgage Installments and Financial Tension for Borrowers

BySamantha Nguyen

Apr 3, 2024
Variable rate mortgages with rising payments

In June 2024, the ECB raised interest rates and this led to an increase in the average installment of adjustable rate mortgages. This was the most noticeable impact of the rate hike on variable rate loans, according to CRIF’s analysis. The average installment increased by +36% compared to mid-2022, with a peak of +49% for mortgages disbursed in the last five years.

The financial exposure for borrowers was also affected by this rate increase, despite making 24 installments between January 2022 and December 2023. CRIF’s analysis shows that variable rate mortgages resulted in a +25% increase in overall debt levels over the past five years.

Although there was an increase in financial tension among borrowers with variable rate mortgages, insolvency rates did not rise significantly. However, CRIF’s financial tension index indicates higher levels of indebtedness and a risk of failure among borrowers with adjustable 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. A potential rate cut in June 2024 could provide relief for borrowers and help stabilize their financial situations.

In light of current macroeconomic and geopolitical uncertainties, it is important to remain vigilant and prepared for any challenges that may arise in the future.

By Samantha Nguyen

As a content writer at newsqwe.com, I am passionate about crafting engaging and informative articles that captivate our audience. With a background in journalism and a keen eye for detail, I strive to deliver content that is not only well-researched but also adds value to our readers' lives. From breaking news stories to in-depth features, I take pride in my ability to tell compelling stories that resonate with our diverse audience. When I'm not typing away at my keyboard, you can find me exploring new cafes, practicing yoga, or getting lost in a good book. I am thrilled to be a part of the newsqwe.com team and look forward to sharing my love for writing with all of our readers.

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