Home loans with loose standards go sour when rates rise – ECB
Borrowers who “may not initially appear risky” could be swept away in a downturn, bank warns
A higher share of mortgages issued under loose standards make mass defaults more likely, according to research from the European Central Bank.
In the ECB’s macro-prudential bulletin on June 25, Giorgia De Nora and colleagues examine residential real estate lending standards, credit volumes and financial stability indicators from the eurozone.
They find that not only do weak individual lending standards lead to a higher probability of default when monetary policy is tightened, but that the negative
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