According to the news agency’s calculations based on data from the European Central Bank, the volume of prepayments increased by 24% in Spain and 23% in Portugal in the first five months of 2023. Compared to this, Europe’s largest economy, Germany, experienced a 39% drop, and the Netherlands a 42% drop.
Most of the difference can be explained by the prevalence of loans with variable interest rates.
In Southern Europe, the ratio of loans with variable interest rates, such as one-year Euribor, is relatively high, the value of which rose from a level below 0% a year ago to over 4%. Some borrowers in the region now have to pay three times as much interest as they did 12 months ago.
The situation is different in countries where fixed interest rates are more common, in Germany, for example, most mortgage borrowers have fixed interest rates for 10 years or more. The ECB’s interest rate hikes do not have an immediate effect, borrowers prefer to invest their free cash. Not necessarily in bank deposits: savers earn on average more than 3% in France and 2.6% in Germany on one-year fixed bank deposits.
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