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American Focus > Blog > Economy > European homeowners face rising mortgage costs until 2030
Economy

European homeowners face rising mortgage costs until 2030

Last updated: May 28, 2025 5:10 am
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European homeowners face rising mortgage costs until 2030
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European Central Bank Warns Homeowners of Continued Mortgage Cost Increases

Homeowners across the euro area are set to experience continued financial strain due to rising mortgage costs, despite declining interest rates, according to a recent warning from the European Central Bank (ECB).

In a blog post published on Wednesday, ECB staff highlighted that many borrowers who secured home loans during the period of low and negative interest rates will face the need to remortgage in the coming years. This process is expected to result in financial constraints for households, leading to a potential “drag on consumption” that may persist until at least 2030.

Following a surge in inflation from late 2021, the ECB moved to end the era of negative interest rates in 2022, raising borrowing costs from -0.5 per cent to 4 per cent over a span of 15 months. While the ECB has since begun to lower borrowing costs, the analysis suggests that the average mortgage rate is projected to continue rising for several more years.

The European mortgage market’s structure, where a significant portion of borrowers lock in fixed rates for several years, contributes to the delay in experiencing the benefits of rate reductions. In countries like France and Germany, a substantial percentage of mortgage rates are fixed for extended periods, with only a small portion being adjustable. This means that many homeowners with fixed-rate mortgages from the low interest rate period are likely to face higher rates upon repricing.

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Additionally, as existing borrowers with lower-rate loans gradually repay their mortgages, they are being replaced by new borrowers taking up loans at higher rates, further contributing to the financial burden on households.

The ECB’s consumer expectations survey indicates that nearly half of homeowners in the euro area have already reduced their spending or savings in response to or anticipation of higher interest rate payments. A significant portion of these homeowners plans to continue cutting down on consumption over the next year.

Despite the ECB’s efforts to lower borrowing costs, the impact of rising mortgage rates is expected to be felt by homeowners throughout the euro area until the end of the decade. The need for households to remortgage at higher rates and the prevalence of fixed-rate mortgages from the low interest rate era are key factors contributing to this financial strain.

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