BANKING

Cost of loan servicing gets even higher

Cost of loan servicing gets even higher

After the soaring costs of energy, food and services, households with mortgages will also face a higher monthly tranche in servicing their debt, as the European Central Bank is expected to raise its interest rates by the end of the year. The same applies to loans taken out by corporations.

The rates rise is not just a possible scenario; markets have already taken it into account, while it is also reflected in the one-year Euribor rate (which incorporates estimates regarding the course of rates over the next 12 months). 

That should also raise the three-month Euribor, based on which almost all mortgages and corporate loans are priced.

Consequently, for a 20-year mortgage of 100,000 euros, the increase in the monthly installment due to the rise of the three-month Euribor rate by 0.5% starts from €25, taking the tranche due from €563 to €588. In case the Euribor rate grows by a full percentage point, the installment for the same loan will increase by €51, climbing to €614.

Banks hope this does not have an impact on the amount of nonperforming loans in the months to come, given the overall pressure on disposable incomes.