The financial stability Review published by the ECB showed that if the increase in mortgage rates exceeds the rate of inflation, the eurozone housing market, which already looks overvalued, may show a fall.
Meanwhile, the ECB said that in the event of a further escalation of the Russian-Ukrainian conflict and a stronger than currently expected increase in inflation, asset prices may fall even more.
According to official data, the growth of housing prices in the eurozone has been observed for many years, mainly due to low mortgage rates.
The ECB has calculated that house prices in the eurozone are overvalued by nearly 15% on average, with some countries experiencing overpricing by about 60%. According to ECB forecasts, house prices could fall by 0.83%-1.17% for each increase in mortgage rates by 0.10% after adjusting for inflation.