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The impact of rising mortgage rates on the euro area housing market

Author

Listed:
  • Battistini, Niccolò
  • Gareis, Johannes
  • Roma, Moreno

Abstract

Against a background of rising mortgage rates, this box investigates the impact of changes in mortgage rates on euro area house prices and housing investment through linear and non-linear local projections. The model evidence suggests that housing market dynamics are very sensitive to mortgage rates, especially in a low interest rate environment. At the current juncture, this points to a significant risk of a marked slowdown of the euro area housing market. Yet, pandemic-induced shifts in housing preferences, which are not captured by the models, could counteract higher mortgage rates and could potentially increase uncertainty surrounding the housing outlook. JEL Classification: E22, E31, E32

Suggested Citation

  • Battistini, Niccolò & Gareis, Johannes & Roma, Moreno, 2022. "The impact of rising mortgage rates on the euro area housing market," Economic Bulletin Boxes, European Central Bank, vol. 6.
    • Handle: RePEc:ecb:ecbbox:2022:0006:4
    Note: 337417
    as

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    More about this item

    Keywords

    house prices; Housing investment; mortgage rates;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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