European Mortgage Rates Rise as ECB Hike Takes Effect

Mortgage rates in Europe have been rising since August, following the European Central Bank's (ECB) latest interest-rate increase. The impact of this hike varies significantly between countries, with some borrowers facing a quicker effect than others.

In France, mortgage rates could approach 4% by the end of the year if inflation does not ease, according to Pierre Chapon, co-founder of mortgage broker Pretto. This would add around €37 to the monthly repayment on a new €200,000 mortgage over 20 years and increase the total interest bill by approximately €8,930.

Italian variable-rate borrowers face a quicker impact from the ECB's decision, with Nicoletta Papucci of MutuiOnline expecting the average nominal interest rate (TAN) to rise from around 2.80% to 3.05% over the coming weeks. This would add approximately €25 to the monthly repayment on a €200,000 variable-rate mortgage with 20 years remaining.

Spanish mortgage rates could also rise further, with several lenders expected to revise their mortgage products upward in the coming weeks. A spokesperson for iAhorro said that 'several lenders will likely revise their mortgage products upward in the coming weeks', although others may raise rates by a more moderate amount or hold them steady.

German mortgages continue to follow government bond yields, and Michael Neumann of Dr Klein Privatkunden expects mortgage rates to stabilise and move broadly sideways over the rest of the year. Despite the higher cost of borrowing, demand for home ownership remains strong in Germany, although rising rates and high transaction costs are making purchases increasingly difficult to afford.