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

Niccolò Battistini, Johannes Gareis and Moreno Roma

Economic Bulletin Boxes, 2022, vol. 6

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

Keywords: house prices; Housing investment; mortgage rates (search for similar items in EconPapers)
Date: 2022-09
Note: 337417
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