Magyar nyelven nem elérhető
Davide Malacrino
- 18 June 2025
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 4, 2025Details
- Abstract
- This article analyses the transmission of monetary policy to consumption via its impact on mortgage payments. Simulations using the current distribution of loans across households show that, despite rate cuts, a substantial part of past tightening is still in the pipeline. The average interest rate on outstanding mortgages is expected to continue to increase, translating into a persistent drag on the expected consumption recovery. Lower-income households were affected earlier in the cycle and will be the most affected by 2030 in cumulative terms, disproportionately weighing on consumption due to their higher marginal propensities to consume. The estimates suggest that up to 35% of the overall impact on consumption via this mortgage cash flow channel has not materialised yet. This delayed drag distinguishes the current easing cycle from previous ones. It reflects (i) the fact that the latest hiking cycle started after a long period of low rates, (ii) the less complete pass-through of hikes due to the higher share of fixed-rate mortgages and the pace and magnitude of the tightening cycle, and (iii) the outlook for the current interest rate cycle, which is expected to leave interest rates on new loans at higher levels than before 2021.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G51 : Financial Economics
- 28 May 2025
- THE ECB BLOGDespite recent ECB rate cuts, the average interest rate on mortgages is expected to increase further. This is because of lagged effects from the latest hiking cycle. The ECB blog shows that the resulting drag on consumption could last at least until 2030.Details
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 26 September 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2024Details
- Abstract
- The increase in policy rates has translated into higher interest rates on deposits in both the euro area and the United States, albeit more so in the euro area despite a smaller increase in the policy rate and a lower starting point. As in previous hiking cycles, the increase in remuneration has been considerably smaller for overnight deposits than for other assets, triggering a rebalancing of money holders’ portfolios in both economies. As policy rates increased, credit to firms and households fell more sharply in the euro area than in the United States. The pass-through to lending rates was rather similar. Yet, the greater prevalence of fixed rate mortgages in the United States entailed a slower transmission to rates on existing mortgages. The developments in deposits and loans were mirrored in broad money growth, with high US deposit volumes reflecting the much larger pandemic-related asset purchases by the Fed, and with the moderation in lending volumes having been the main driver of the weakening in monetary dynamics in the euro area, whereas in the US, other sources were the initial drivers, with bank lending only contributing later.
- JEL Code
- E40 : Macroeconomics and Monetary Economics→Money and Interest Rates→General
E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions