Study Reveals Varied Impact of ECB Rate Hikes on European Household Loans
A new study released November 10, 2025, examines household lending across nine European nations – Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia – and finds significant disparities in how quickly and effectively European Central Bank (ECB) monetary policy rate increases are passed on to borrowers. The research, utilizing detailed credit register data, analyzes mortgage and consumer loan trends, considering borrower age, loan duration, and interest rate structures.
The analysis demonstrates near-complete transmission of ECB rate hikes to mortgage loan costs. However, the impact on consumer loans is considerably weaker. Younger borrowers experience a more substantial increase in mortgage rates, while facing a lesser impact on consumer credit. Conversely, longer loan terms in both mortgage and consumer loan markets correlate with a more pronounced pass-through of interest rate changes.
The study’s findings offer insights into the effectiveness of monetary policy and it’s differential effects on various household segments in the post-pandemic period.
JEL codes: E52, G21, D14
The full study is available in English at: https://datnes.latvijasbanka.lv/papers/WP_9_2025.pdf
