The interest rate exposure of euro area households

Presenter: Panagiota-Tetti Tzamourani, Deutsche Bundesbank

We examine the redistributional effects of changes in the interest rates for euro area households using data from the Household Finance and Consumption Survey. We estimate their ‘unhedged interest rate exposure’ (URE), that is, the difference between maturing assets and maturing liabilities at a point in time, defined by Auclert (2017). Households with positive UREs, typically invested in short term deposits and holding no or fixed term debt, are hurt from a drop in the real interest rates, whereas households with negative UREs benefit. We examine the distribution of the UREs along the net wealth, income and age distribution for the euro area as a whole and for individual countries. Households in the lower end of the wealth and income distribution, and younger households, typically with smaller liquid savings and higher debt exposure, benefit from lower interest rates. The extent though to which households are exposed to changes in the interest rate and the distributional pattern of the UREs along the wealth, income and age distribution differs between euro area countries.