Bank lending rates and the riskiness of euro area household loans

29 Pages Posted: 11 Mar 2018 Last revised: 8 Feb 2024

Date Written: February 5, 2024


I assess the impact of the recent hike in bank lending rates on the euro area borrowers using a novel micro-simulation framework that updates household-level data of a representative survey collected in 2020-2021 with up-to-date macro-financial information. The key novelty is that existing mortgages are gradually repaid, and new ones are extended, a feature necessary for medium-term simulations in a period of sizable credit growth. Although debt-to-income ratios are slightly declining, debt servicing has become more demanding since bank lending rates have started increasing and effects are stronger for recent borrowers and borrowers holding adjusted rate mortgages, resulting in higher levels of loans held by households in distress.

Keywords: Household Finance, Mortgages, Micro-Simulations, Financial Stability

JEL Classification: D14, D15

Suggested Citation

Palligkinis, Spyros, Bank lending rates and the riskiness of euro area household loans (February 5, 2024). Available at SSRN: or

Spyros Palligkinis (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

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