Luxembourg / Interest rates have been falling since the start of the year – but property buyers are still waiting

After the European Central Bank (ECB) ended the long environment of low and punitive interest rates in July 2022 and started a series of major interest rate hikes, interest rates in this country also increased significantly. Within a short time they had risen to a peak in December 2023.

In mid-2022, Luxembourg households had to accept an average of just 1.3 percent for new real estate loans with a variable interest rate. In the December 2023the month with the highest interest rates to date, it was a whopping 5 percent.

After the ECB lowered the main interest rate again in 2024 as the inflation rate decreased, the average interest rates in this country have also fallen again. High new figures from the Central Bank of Luxembourg At the end of September they averaged 4.41 percent – lower than at the beginning of the year, but still three percentage points higher than two years ago.

Interest rates for fixed rate loans have followed a similar trend: after a historic low rate in December 2020 (1.26 percent), the rate rose to a high of 4.16 percent last November. In the autumn of 2024, more precisely in September, this value fell again to 3.47.

The fall in interest rates, along with the fact that they have also fallen significantly Property pricesbut so far it has not been enough to attract more buyers back to the market. Due to rising interest rates, the amount of money borrowed continues to decline significantly: in 2023, a total of around 5.5 billion euros in real estate loans were granted – and in 2021 , more than 9 billion euros.

The numbers were still poor between January and September 2024: at 4.17 billion euros, the number of new real estate loans was more than two billion euros lower than the first nine months of 2022 and also 0.2 billion lower than the same period last year. .

Nevertheless, there are also signs of uncertain development: compared to a low of 360 million in November 2023, the amount of the loan was significantly higher again in September at 450 million euros. However, the market is still far from monthly figures of more than 700 million per month as of 2022.

Like the interest on loans, the interest on savings deposits has also improved in recent months: Although the Luxembourg banks only offered their customers a penalty interest, on average, on the deposits their savings in January 2022, the average interest rate on new savings deposits in the form of “dépôts” of up to one year peaked at 3.46 percent in January 2024. In September (the latest figures available) there was it is 3 percent.

Luxembourg private households have responded: Since January 2023, they have relied on traditional savings again and have invested more than 3 billion euros per month in fixed-term investment accounts for up to a year. In March 2024 alone there were 4.85 billion. For comparison: in 2021 in total there were only 263 million.

The European central bank already has three interest rate cuts undertaken this year. Most market experts assume that key interest rates will fall further in the coming months. This means that interest rates offered in Luxembourg are likely to fall further.