Mounting payments with variable rate mortgages

Variable Rate Mortgages: The Unforeseen Impact of ECB Rate Hike on Borrowers Amidst Economic Uncertainty

In January 2022, 26% of active mortgage loans were at a variable rate, and the rate hike by the ECB had a significant impact on the average installment of these loans. According to an analysis conducted by CRIF, the average installment for variable rate mortgages increased by +36% compared to the lows of mid-2022, with a peak of +49% for mortgages disbursed in the last 5 years. Despite borrowers making 24 installments between January 2022 and December 2023, the overall level of debt for those with variable rate mortgages in the last 5 years increased by +25%.

Despite the increase in interest rates, there has not been a significant increase in the insolvency rate for those with adjustable rate mortgages. However, an analysis of financial tension index by CRIF shows that borrowers with these types of loans are experiencing worsening financial situations. Simone Capecchi, Executive Director of CRIF notes that while relief may come from possible rate cut in June 2024, borrowers must remain vigilant amidst uncertainty and stay informed to effectively manage financial stress.

In this current macroeconomic and geopolitical context, it is crucial for borrowers to remain proactive and adaptable when facing potential challenges. As such, staying informed about changes in financial landscape is key to ensuring stability and managing financial stress effectively.

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