Growth in loans to households continues to increase steadily
House prices also rise further
20 October 2021
Chart 1. Annual growth rate of euro area loans to households and interest rate for house purchase
Interest rate for new business, percent
■ Growth rate of loans to households ■ Bank interest rates
Source: ECB statistics.
Note: Housing loans account for approximately 77% of total adjusted loans.
The growth rate of lending to households has gradually increased over recent years to reach a high of 4.2% in August 2021 (see Chart 1). Meanwhile, the euro area bank interest rate on loans for house purchase has moved steadily downwards from 3.9% in August 2011 to 1.3% in August 2021.
Select your own country to see the average interest rate for house purchase applied by banks.
The rate at which house prices grew also increased. In the euro area, house prices have grown by 7.3% over the past year and 17.6% over the past three years. All the euro area countries saw an increase in the rate at which house prices grew during the last three years, as show in Chart 2.
Chart 2. Change in house prices
Euro area aggregate and countries, nominal prices.
Q2 – 2021
Sources: Eurostat and national statistics, ECB calculations.
Chart 2 compares one-year changes to changes over longer periods of time, making it possible to observe the wide spread of price developments across the euro area and individual euro area countries.
The largest changes were recorded in Slovakia, at 18.6% over the last year and 43.3% in Luxembourg over the past three-year period.
Use the scrollbar to see the developments of house prices over different periods for the euro area and euro area countries.
Chart 3. Indices of house prices and harmonised consumer prices (HICP)
Indices: February /Q1-2011 = 100
■ House prices ■ HICP
Sources: Eurostat statistics, ECB statistics and calculations.
The relatively steep rise in housing prices compared to the inflation rate since 2015 is shown in Chart 3. The euro area harmonised index of consumer prices (HICP) have been steadily increasing since 2011, reaching 15% in September 2021. Meanwhile, the index of house prices has increased by 32% until Q2 2021.
Select your own country to see housing price developments compared to inflation rate.
The household sector covers individuals or groups of individuals who are not only consumers, but also entrepreneurs (e.g. sole proprietorships and partnerships without legal status). The sector also covers non-profit institutions serving households (e.g. churches, charities and trade unions) that are reported together with households.
House prices is a term which is often used as a synonym for “residential property prices”. House price indices (HPIs) provided by the European Statistical System, however, have some distinct characteristics. HPIs are produced according to a concept that is harmonised across the EU, and are provided by Eurostat on a quarterly basis. Publication dates are announced in a release calendar, and each publication of data is accompanied by a Eurostat press release.
The adjusted total loans to household series is the headline series used by the ECB for the analysis of credit developments, since it provides a better view of lending to the real economy by euro area banks (Monetary Financial Institutions (MFI)). The adjusted series includes an adjustment for sales and securitisations of loans removed from the balance sheet and for the impact of notional cash pooling positions resulting from cash management services provided by certain banks to corporate groups.
More information on loans in the context of bank (Monetary Financial Institutions) balance sheet statistics can be found in the Manual on MFI balance sheet statistics, in particular in Section 4.3 on loans and Section 7.4 on adjusted loans.
Bank lending for house purchase is defined as the credit extended to households for the purpose of investment in housing, including building and home improvements. Included are loans secured by residential property (i.e. mortgage loans) that are used for house purchase and, where identifiable, other loans for house purchase provided on a personal basis or secured by other types of asset.
Bank interest rates – New business is defined as any new agreement between a household and a bank. New agreements comprise all financial contracts whose terms and conditions specify the interest rate on the loan for the first time and all renegotiations of existing loans. Prolongations of existing loan contracts which are carried out automatically, i.e. without the active involvement of the household, and which do not involve any renegotiation of the terms and conditions of the contract, including the interest rate, are not regarded as new business. Bank interest rates are therefore distinct from advertised nominal rates, because households might be able to negotiate better terms and conditions with the credit institution or other institution than those otherwise advertised.
The composite cost-of-borrowing indicators are based on bank (Monetary Financial Institutions) interest rate statistics. This measure is used to accurately assess borrowing costs for households and further enhances cross-border comparability. More information on composite cost-of-borrowing indicators can be found in the Cost-of-borrowing indicators – Methodological note.
The annualised agreed rate is the interest rate that is individually agreed between the bank and the household for a loan, converted to an annual basis and quoted in percentages per annum. This means that bank interest rates take into account the frequency of interest payments. All things being equal, the more frequent the interest payments, the higher the bank interest rate recorded in the statistics.
In ECB balance sheet statistics, growth rates are calculated on the basis of transactions rather than by simply comparing end-of-period outstanding amounts. By excluding non-transaction-related changes, these growth rates should only represent developments in outstanding amounts resulting from transactions. For more information on transactions and the calculation of growth rates, see Sections 7.2 and 7.3 of the Manual on MFI balance sheet statistics.
The residential property price indicator for the euro area is an average of non-harmonised country indicators based on data from national sources. It generally includes new and existing dwellings as well as houses and apartments, although the coverage varies somewhat across countries. It gives an indication of the broad development trends of residential property prices in the euro area. The residential property price index is based on transactions (i.e. economic flows that reflect the creation, transformation, exchange, transfer or extinction of economic value and involve changes in the ownership of residential property).
The changes in house prices in Chart 2 are calculated by comparing the latest available data from Q2-2021 with the Q2 data one year earlier for the “One-year-change”, with the Q2 data two years earlier for the “Two-year-change” etc.
The Harmonised Index of Consumer Prices (HICP) is calculated and published by Eurostat, the Statistical Office of the European Union, on the basis of a statistical methodology that has been harmonised across all EU Member States. HICP data shown in Chart 3 are neither seasonally nor calendar adjusted.
All data series used in this Insight can be found in the downloadable file at the bottom of the Insight. Due to data unavailability of residential property prices from Ireland and Cyprus, other series has been used.
The calculation of growth rates is explained in the ECB Statistics Bulletin technical notes
Property prices are discussed in ESRB risk dashboard, June 2021 (Issue 36)
Data on interest rate statistics, for instance lending for house purchase, as well as residential property prices and the HICP, are available in the ECB’s Statistical Data Warehouse
All data series used in this Insight can be found in the downloadable file at the bottom of the Insight.