Thousands of borrowers will be asked to pay reduced installments for loans from next month, after yesterday’s news, the third in 2024, decision to relax the monetary policy in the Eurozone.
The ECB deposit facility rate stood at 3.25% compared to 4% until last May, with analysts’ estimates calling for another 25 basis point cut in December to 3%.
For the new year, there are scenarios for a cut even at all meetings of the Eurobank board during the first semester (January, March, April, June).
If this forecast is confirmed, the index under consideration will be set at 2%, which is half of the high recorded during the phase of strengthening the cost of money to deal with inflationary pressures.
Benefits for loans
As a result, the majority of those who repay loans to banks, they will see in the coming months a significant de-escalation of their doses.
This is a process that has already started and concerns all business and professional loans with a floating interest rate.
This is because the interbank euribor indices, to which the majority of the existing loans of the two categories are linked, have registered a significant fall in recent months, which was formed at higher levels than the reduction of the ECB’s interest rates.
Specifically, the 1-month euribor from its high of 3.9% until last May is now in the region of 3.2%. This reduction of 70 basis points has been largely passed on to loans in Greece, relieving borrowers.
The latest figures from the Bank of Greece are indicative. Last August the weighted average interest rate on self-employed loans with a remaining term of 1 – 5 years was 6.96%, lower by 87 basis points compared to the beginning of this year.
The cost of loans of the same duration to non-financials decreased by 53 basis points respectively.
The case for housing loans
On the other hand, a ceiling on interest rates has been applied to mortgage loans since last spring, the validity of which expires next May. So at this stage, no change in monthly payments is expected.
Indeed, from the official statistics of the Bank of Greece it appears that from March 2023 until today, the average interest rate in this category of loans is stuck at 4.40%.
For it to be reduced, euribor rates would need to fall by more than 50 basis points from current levels.
This is expected, according to analysts, to happen in the first quarter of 2025, if the forecasts for further cuts in ECB interest rates from now on are confirmed.
In this case, from the new year there will be a reduction in installments for those who have received a mortgage loan with a variable interest rate.
Example
For a balance of 100,000 euros with a repayment term of 15 years and an interest rate today of 4.40%, the monthly installment is 760 euros.
For every 25 basis point decline from now on in the linked benchmark, the monthly benefit will amount to €15.
So with a cumulative decline in European interest rates by 150 basis points, the profit per 100,000 euros of balance for this repayment period will reach approximately 90 euros.
New offers
In addition to those who repay a loan, those who are interested in bank financing today will also be winners.
The reduction in the cost of money will allow banks to launch more preferential programs in all credit categories.
They are already moving in that direction. Housing loans are a typical example, in which this year most banks have adjusted their interest rate policy.
In this context, there are currently programs that ensure a fixed interest rate below 3% for a period of up to 3 years, while reductions were also applied to the spreads of products with floating installments, which are linked to the euribor indices.
In any case, banks are now given the opportunity to make their financing programs cheaper, with the aim of boosting demand from both households and businesses.
Source: ot.gr
#borrowers #pay #installment
