Determinants of Mortgage Loans in Bulgaria and the Euro Area: A Comparative Analysis

This article investigates the factors that determine the dynamics of mortgage lending in Bulgaria and the Euro area by using ordinary least squares (OLS) regression models based on stationary time series over the period 2010–2025. The results show that in Bulgaria, the dynamics of mortgage lending are determined primarily by wage growth, inflation, and the high liquidity of the banking system, which increases banks’ capacity to extend new loans. In contrast, in the Euro area, the main factor driving mortgage lending trends is interest rates on mortgage loans, with the development of the real estate market, as measured by house price index, also exerting a significant influence. The findings further indicate that, despite the high degree of economic integration between Bulgaria and the European Union, the factors determining mortgage lending differ, which justifies the need for separate modeling of mortgage loans in the two economies. Moreover, mortgage lending transmission mechanisms differ substantially across the two economies despite their close monetary integration, highlighting the importance of country-specific institutional characteristics. The faster growth of mortgage lending by Bulgarian banks compared to those in the Euro area does not yet pose risks to the stability of Bulgaria’s banking system.