In recent months, the European Central Bank (ECB) has announced plans to raise interest rates. This decision has had a significant impact on variable rate mortgages, with borrowers facing increased financial exposure as a result.
A study conducted by CRIF found that the average installment of these loans increased by an average of +36% compared to mid-2022, with a peak of +49% for mortgages disbursed in the last 5 years. Despite this increase, those with adjustable rate mortgages did not show an increase in insolvency rates. However, there was an increase in financial tension among borrowers due to the higher levels of indebtedness and risk of failure associated with variable rate mortgages.
Simone Capecchi, Executive Director of CRIF, commented on the potential impact of interest rate dynamics on variable rate borrowers in the coming years. While there has been no significant increase in insolvency rates so far, there has been a notable rise in financial stress among borrowers. This is particularly concerning given current macroeconomic and geopolitical uncertainties that could lead to further challenges in the future.
In light of these developments, it is important for borrowers to remain vigilant and prepared for any potential changes in interest rates and other economic factors that could impact their financial situations. It may also be advisable for some borrowers to explore options for refinancing or consolidating their debt to help alleviate some of the financial stress they may be experiencing.
