Eurozone mortgage costs surge to seven-year high

HOUSEHOLDS in the eurozone looking to buy or remortgage are facing the steepest borrowing costs in seven years, even before the latest rate increase is priced in.

The surging costs are another hit to consumer budgets, with many workers already seeing their real-terms wages shrink and inflation at a record high.

Borrowers are having to fork out 2.26pc in interest payments on new property loans, figures from the European Central Bank for August showed.

While historically low, this brings borrowing costs to the highest level since November 2015. They were 0.11 basis points higher than in July.

The data are yet to reflect the ECB’S September rate rise, which brings more pain for first-time buyers and those whose fixed rates are expiring.

The ECB raised its three interest rates by a record 0.75 basis points in September.

ECB president Christine Lagarde then signalled that there will be further rises on the way. While investors should not see such large increases as “the norm”, she said there would be several rises in the coming months.

This will add further pressure on households who are already facing the fastest rising consumer prices in the euro’s 23-year history. Russia’s tightening of gas supplies to Europe after invading Ukraine has pushed up energy and commodity prices. Inflation in the Eurozone reached 10pc in September while energy prices were up by 41pc, according to Eurostat estimates.

Mortgage products across the board have become more expensive. Loans with a variable rate or a one year fix jumped by 0.24 points to 2.08pc.

Meanwhile, mortgages fixed for up to five years rose by 0.18 points to 2.44pc.

Banks have also started paying out more interest on savings but these rates are lower than those of mortgages, the data showed. Deposits redeemable at three months’ notice on average now pay 0.7pc in interest, an increase of 0.24 basis points.

Economists expect that the eurozone will fall into recession this winter, as higher interest rates and the cost of living crisis pull demand out of the economy.