Mortgages in Europe are becoming more expensive again: who will be hit first and how much will a €250 thousand loan cost
Mortgage loans in the eurozone have started to become more expensive again. For those who have saved a down payment and expect to buy an apartment or house in Italy, Germany, France or another eurozone country, this means a simple thing: a bank offer received a few months ago may already look different today.
According to fresh data from the European Central Bank (ECB), the average cost of new loans for house purchase rose from 3.54% in July to 3.60% in August 2026.
Loans with floating rates or initial fixation of up to one year became most expensive: their average rate rose to 3.86%. For mortgages with fixation of more than ten years it was 3.43%.
And there is another important detail: these figures refer to August. Already on 10 September the ECB raised its key interest rates by 0.25 percentage points. Therefore the August statistics do not yet show the full effect of the latest tightening of monetary policy.
Why mortgages became more expensive again
The rate on a housing loan depends not only on one ECB decision, but the general background for banks has changed noticeably.
The bank itself needs to raise money — through deposits, bonds, the interbank market and other sources. When the cost of such funding rises, new loans gradually become more expensive.
The ECB notes that long-term market rates have risen significantly in recent months. By early September, eurozone government bond yields and long-term risk-free rates reached multi-year highs.
And on 10 September the regulator added another factor: the ECB deposit rate rose to 2.50%, the rate on main refinancing operations to 2.65%.
This does not mean that mortgages automatically become more expensive by exactly the same 0.25 percentage points. Banks take into account the loan term, their own funding cost, borrower risk, the size of the down payment and competition in the specific market.
But the direction has become less comfortable for home buyers: counting on a quick return of super-cheap loans is now considerably more difficult.
One percent seems small — until you calculate the payment
On a long mortgage even a small change in the rate turns into a significant amount.
Take a conditional loan of €250 thousand for 25 years with annuity payments.
- at a rate of 3% the payment will be approximately €1186 per month;
- at 4% — about €1320;
- at 5% — approximately €1460.
Between rates of 3% and 5% the difference is about €270 per month.
For a family this is more than €3 thousand of additional burden per year. And over the multi-year loan the difference turns into tens of thousands of euros of additional interest.
That is why a home buyer is sometimes better off getting a lower mortgage rate than obtaining a small discount on the property price from the seller.
Floating rate now carries greater risk
Borrowers with floating rates or a short fixation period feel changes in the financial market fastest.
In August the average rate on new mortgage loans of this category in the eurozone reached 3.86% — 0.17 percentage points more than a month earlier.
With long fixation the situation is calmer. The average rate on loans with initial fixation of more than ten years was 3.43%.
The difference shows a kind of price of certainty: the borrower can fix conditions for a long time or accept the risk that the rate will regularly change together with the market.
What happens to an already originated mortgage
For owners of existing loans everything depends on the contract.
If the rate is fixed for the entire term or for many years ahead, the growth of today's market rates usually does not change the current monthly payment.
But the problem may arise later — when the fixation period ends and the remaining debt will have to be refinanced under new conditions.
Borrowers with floating rates feel the change much faster.
Therefore one of the most important points of a mortgage contract now is not only the amount of the payment, but the date of the next interest rate review.
Average 3.60% does not mean that your bank will offer exactly this rate
ECB figures are averages for the whole eurozone.
The real rate for a specific borrower can differ noticeably.
It is affected by the country and bank, the size of the down payment, the property value, family income, credit history, loan term and type of interest rate.
Therefore a Ukrainian buying an apartment, for example in Italy, may get a completely different offer than a borrower with similar income in France or Germany.
When comparing loans, not only the advertised interest rate matters, but also the total cost of the loan including commissions, insurance and mandatory associated expenses.
Should you postpone buying a home because of rising rates
The rise in mortgage rates itself does not mean that buying a home now is unprofitable.
The apartment price, the size of the down payment, the cost of rent in a particular city, tax benefits and family plans may be more important than a difference of a few tenths of a percentage point.
Moreover, real estate markets in European countries differ greatly from each other.
But one important assumption has changed.
Until recently a buyer could base their calculations on the fact that interest rates would gradually go down, and an expensive mortgage could later be cheaply refinanced.
Today such a scenario can no longer be considered guaranteed.
For a person planning to buy a home in the eurozone, it is safer to check the budget assuming that the current rate may persist for a long time.
If the purchase remains affordable even under this scenario, a possible future reduction in rates will become an additional advantage.
But if the family budget only works under the condition of a quick return of cheap mortgages, the safety margin is considerably smaller.
That is why a European mortgage is becoming again not only a question of the apartment price. The price of money for the next 20–30 years plays an increasing role.
Sources: European Central Bank, ECB decision on interest rates.
