All in all, vulnerabilities could be exposed in those parts of the euro area where residential real estate valuations are particularly stretched, where households are highly leveraged, and where borrowing has taken place primarily at variable interest rates and where loan-to-value ratios are high.
The analysis presented in Box 6 concludes that due to the on average relatively comfortable loanto-value ratios, it would take a sizeable house price decline in addition to any adverse disturbance to the debt servicing capacity of mortgage borrowers before banks would incur large credit losses. 5.