Extract of the Introduction

Abstract: The strong growth in consumer credit and the wide use of mortgage renegotiations observed since 2015 has affected households’ ability to repay their loans. In this paper, we provide a novel way to account for these trends, extending Michelangeli and Pietrunti (2014) microsimulation model of households’ financial vulnerability. The extension provides a more accurate assessment of the financial stability risks stemming from the household sector. The growth in consumer credit drives an increase in the share of vulnerable households, but with small effects on the overall debt at risk. Mortgage renegotiations contribute to a decrease in households’ vulnerability.