ECB: Consumers in Western Europe expect a rise in house prices and mortgage rates

Consumers of financial services in the euro area expect the price of their homes to rise by an average of 2.1% over the next 12 months, according to the latest European Central Bank Consumer expectations Survey. It covers about 14,000 people over the age of 18, living in six of the largest economies of the euro area – Belgium, Germany, Spain, France, Italy and the Netherlands.

According to the survey, which covers the month of July, there is no change compared to attitudes from May – then the forecast was for property growth. ECB surveys are monthly, except for specific data which are only collected quarterly. The results are used for analysis and may influence the policy of the Central Bank.

Residents of the six countries, however, predict a very slight increase in mortgage interest rates – up to 5.1%. Access to credit is expected to tighten to some extent in the next 12 months. The share of respondents who applied for a loan in the last three months increased to 14.8% compared to 13.4% in April. The July survey result was the highest since October 2020. The breakdown shows that the increase is mainly due to the desire for credit among the younger consumers – from 18 to 34 years old.

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There is more pessimism in the expectations for nominal incomes – on average, the respondents say that in the next 12 months they will take only 1.1% more income. In May the forecast was for 1.2% growth. The decline is mainly dominated by people with the lowest incomes. At the same time consumers expect their nominal spending to rise by 3.4% over the next 12 months, the lowest level since March 2022.

Compared to the results of the June poll, people are more pessimistic about economic growth. In fact, the forecast is for a 0.7% decline in the economy. In June the results showed a 0.6% expected decline. For the next 12 months, according to the survey, inflation in the six countries will average 3.4%, and that for the next three years – about 2.4%. Younger consumers predict lower inflation, while seniors, between the ages of 55 and 70, are more pessimistic.