FRANKFURT, May 15 Reuters Stress in the euro zone market for home loans is manageable despite higher interest rates stretching borrowers and lax checks by some banks, the European Central Bank said on Wednesday.

Record high interest rates, imposed by the ECB to bring down inflation, have taken a toll on house prices, particularly in countries where there had been boom when rates were low, such as Germany.

The ECB reviewed the mortgage books of 37 euro zone banks, accounting for 40 of the sector39;s 3.7 trillion euros 4.00 trillion exposure to residential real estate RRE.

It found deficiencies in how mortgages are originated but still came away with a reassuring message.

While the review uncovered some challenges in the RRE sector, the overall outlook remains relatively positive, the ECB said in a newsletter. Although RRE is under some stress, this appears manageable, and banks are actively engaged in addressing concerns.

Of the 1.4 trillion euros worth of home loans outstanding as of last June, 412 billion euros were set to have their interest rate reset likely much higher by June 2025, the ECB said.

This will entail a material risk for borrowers not able to meet higher interest rates, it added.

The ECB39;s review also showed that lenders were still not adequately weighing up risks before granting a mortgage 16 years after a global financial crisis that started in that market and a decade since the ECB took over bank supervision.

For example, banks in…