There is anticipation for the company’s next moves European Central Bank (ECB) and for the possible new rate cut of interest on loans for the euro area. Experts hypothesize that the Bce can continue to reduce the cost of money in the coming months, a decision awaited in particular by those who have mortgages and financing. But given the complex global economic situation, it is not certain that there will be a new rate cut soon.
ECB slows down on new interest rate cuts
What cools the spirits in these hours is Isabel Schnabelmember of the executive committee of Bceaccording to which there would be little room for others rate cuts by the European Central Bank.
According to the economist, a level of interest rates that is too low could even be “counterproductive for the economy”.
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“Given the inflation outlook, I believe we can gradually move towards neutrality if incoming data continues to confirm our baseline,” Schnabel told Bloomberg.
The ECB representative estimates neutrality around 2%-3%. So with the current rate at 3.25% “we may not be that far away”.
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Possible new rate cuts
Currently in the eurozone the interest rate on deposits is of 3,25%that on main refinancing operations 3.40% and that on marginal loans 3.65%.
After reaching 4.50% in 2023, the deposit rate has progressively fallen in recent months thanks to three consecutive cuts decided by the ECB in June, September and October.
Experts expect the ECB to continue reducing the cost of money. To find out if this will be the case we will have to wait a few days, until 12 December, when the next meeting of the ECB board is scheduled.
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The consequences on mortgages
The ECB’s decisions on interest rates directly impact financing and variable rate mortgages.
With a reduction in the cost of money, the cost of financing between banking institutions decreases. This consequently causes thelist of Euriborwhich is taken as a reference for variable rate mortgages.
Therefore, the reduction in interest rates decreases the amount of the loan monthly installment of variable rate home loans.
According to an estimate by Codacons, a 25 basis point cut in interest rates, like the one that occurred in October, entails a reduction in the monthly installment of variable mortgages ranging from 13 to 30 euros.
However, nothing changes for those who have a mortgage fixed rategiven that the interest rate is established at the time of signing and remains unchanged for the entire duration of the contract.
Interest rate cuts may still have an effect on new contracts to be stipulated, making them more advantageous, also stimulating the demand for loans and financing.
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