The financial vulnerability of euro area households – evidence from the Eurosystem’s Household Finance and Consumption Survey


The article investigates how the financial vulnerability of households is affected by different adverse macroeconomic shocks, finding that the effects of such shocks are fairly limited at the euro area level. Second, a new methodology is presented which combines household-level data with aggregate data, providing timely estimates of the impact of shocks on individual households. Those estimates suggest that high-income households have recently experienced the largest declines in wealth. Meanwhile, the impact of consumption expenditure by low-income households has probably been magnified owing to their stronger response to wealth shocks. Third, the extended dataset is then used to derive a breakdown of the effect of recent changes in interest rates and unemployment on measures of financial vulnerability. The article finds that, although households with variable rate mortgages have benefited from declines in interest rates, the impact of falling rates on the debt service-to-income ratios of low-income households has been dampened by the fact that poorer households have been disproportionally affected by rising unemployment.

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