House prices could face a 'disorderly' fall due to rate hikes

European Central Bank review warned tightening financial conditions are testing the resilience of households, firms, governments as well as property markets

The ECB has pointed out that demand for new loans, particularly mortgages, has declined sharply in the first three months of the year due to rising interest rates. Picture :Denis Minihane

Increasing mortgage rates could see a “disorderly” fall in house prices within the eurozone if higher rates continue to reduce demand for homes, a financial review from the European Central Bank (ECB) has found.

The review warned tightening financial conditions are testing the resilience of households, firms, governments as well as property markets. The ECB is due to meet on June 15 to decide whether it should increase interest rates further. Another 0.25% increase is expected.