• Sat. Apr 20th, 2024

Variable Rate Mortgage Borrowers Face Increased Financial Exposure and Stress Due to ECB’s Interest Rate Hikes

BySamantha Jones

Apr 3, 2024
Variable rate mortgages with rising payments

In the last two years, interest rates have had a significant impact on borrowers with adjustable rate mortgages. The most noticeable effect of this was an increase in the average installment of these loans, which rose by an average of 36% compared to the lows of mid-2022. This information comes from a CRIF analysis that examined the effects of mortgage rate hikes by the ECB.

The CRIF analysis revealed that despite making 24 installments between January 2022 and December 2023, borrowers with variable rate mortgages experienced an increase in financial exposure. In fact, there was a +25% increase in overall debt levels over the past five years for those with variable rate mortgages.

While insolvency rates did not increase among those with adjustable rate mortgages, there was a notable rise in financial tension, as indicated by CRIF’s financial tension index. This suggests that borrowers with variable rate mortgages are facing higher levels of indebtedness and a risk of failure.

Simone Capecchi, Executive Director of CRIF, commented on the impact of interest rate dynamics on variable rate borrowers over the past two years. While insolvency rates have not increased significantly, there has been a notable rise in financial stress. A potential relief for borrowers could come from a possible rate cut in June 2024.

Given current macroeconomic and geopolitical uncertainties, it is important for individuals and businesses to remain vigilant and prepared for potential challenges that may arise in the future.

By Samantha Jones

As a content writer at newsnnk.com, I weave words into captivating stories that inform and engage our readers. With a passion for storytelling and an eye for detail, I strive to deliver high-quality and engaging content that resonates with our audience. From breaking news to thought-provoking features, I am dedicated to providing informative and compelling articles that keep our readers informed and entertained. Join me on this journey as we explore the world through the power of words.

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