Eurozone mortgages manageable amid high rates – ECB

The European Central Bank (ECB) reported on Wednesday that stress in the eurozone home loan market is “manageable” despite higher interest rates and some lax lending practices, according to Reuters.

Record-high rates have impacted house prices, especially in Germany.

The ECB reviewed the mortgage portfolios of 37 banks, covering 40 per cent of the sector’s 3.7 trillion euros ($4.00 trillion) in residential real estate. It found deficiencies in mortgage origination but noted that banks are addressing these issues.

Out of 1.4 trillion euros in outstanding home loans as of June, 412 billion euros will have their interest rates reset by June 2025, posing risks for some borrowers.

Additionally, 46.5  per cent of mortgages in the year to June 2023 had a loan-to-value ratio over 80  per cent, with 16.5  per cent exceeding the property’s value.

The share of mortgages where borrowers spend over 30  per cent of their income on servicing the loan rose from 47  per cent to nearly 53  per cent between June 2021 and June 2023.

The ECB has asked banks to remedy these issues, emphasising the sector’s commitment to mitigating risks and maintaining stability.