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this post was submitted on 18 Mar 2025
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Not to justify, just explain: That person likely only ever paid the bare minimum to cover interest. It's like when you have a credit card. You can make interest-only payments, or you can pay more to start clearing the actual debt.
But it's not a 5 percent increase, it's a five percentage point increase on the interest.
I'll take a loan calculator with typical Estonian values for an apartment, not a detached house, bought before the Ukraine war with the standard margin + euribor interest scheme.
250k @ 15% down, 30 years, 1.7% base interest + 6 months euribor. Euribor was 0, so we input that into the calculator. Monthly payment is 754 euros. About the same as rent for a decent 3 bedroom apartment, so not a bad deal, right? At least you get to keep it at the end of the 30 years, plus Euribor has been 0% for like a decade, it's never going to go up. Well, now Putin attacked Ukraine and it triggers raised interests because they've already been too low and inflation has been too high. Over the course of the next ~2 years, Euribor goes up to 4%. Now your interest has gone from 1.7% to 5.7% annually, with the euribor part being updated every 6 months. And the payment? 754 euros monthly to 1233 euros monthly. If you're making 2500 euros neto, 754 euros for a mortgage isn't a bad deal, but 1233 euros as the prices on absolutely everything is going up 2-3x? Suddenly it's a lot less affordable, at least if you have a family and such. For a single person it would still be doable.