The European Central Bank (ECB) has lowered interest rates for the third time in a row and the fourth time this year. The price of money (type of deposit facility, which is the reference used now) is set at 3% and the expectation is that the monetary institution will continue on this downward path in 2025. Decisions like this have an impact on the finances of citizens since they move the price of mortgages, loans and bank deposits.
If the ECB lowers interest rates, the price of credits falls; not immediately but as the weeks go by, as financial institutions adapt their commercial offer. The previous declines, in fact, are already noticeable in the statistics. Consumer loans have gone from comfortably exceeding 8% to now hovering around 7.4%; Credit to companies has gone from exceeding 5.2% to now moving at 4.3%.
Within the credit segment, mortgages occupy a fundamental place. In recent months the interest on new housing loans has gone from close to 4% to currently standing at around 3.2%. And this other rate drop, together with those that are expected to also arrive next year, will mean that the downward trend will continue in 2025. According to Helpmycash, the new fixed mortgages “will also see downward adjustments, with interests that could stabilize between 2% and 2.25% during the first semester for solvent profiles.
Outstanding mortgages will also experience relief, in their case due to the drop in the Euribor. He euribor It is the interest at which banks lend money to each other, which is closely related to the price of money set by the ECB. The reference index for most mortgages in Spain moves is now at 2.4%, when a year ago it closed at 3.679%.
The difference from one year to the next is greatly noticeable in the fees. An average mortgage of 150,000 euros, for 25 years and with an interest rate of Euribor plus 1% differential had a monthly payment at the end of December 2023 of 849.06 euros. That same average mortgage but with the current Euribor has a monthly payment of 743.47 euros.
“The mortgage sector will be another major protagonist in 2025. The Euribor could fluctuate between 2% and 2.25% during the first half of 2025, which would mean significant relief for variable mortgages,” explains Olivia Feldman, economist and co-founder of HelpMyCash.
Deposits
Beyond loans, deposits They also experience an impact from the ECB’s interest rate cuts. In this case, when the price of money falls, what banks pay for their clients’ savings also falls.
«For the most conservative savers, fixed-term deposits will continue to be an attractive option, although time to obtain high returns is running out. Banking entities are adjusting the APR of their deposits downwards, following the monetary policy of the ECB,” they indicate from the aforementioned comparator, which adds that one-year foreign banking products above 3% can still be used.
“As the ECB continues to reduce interest rates, these products will see a significant decrease in their attractiveness,” says Feldman. Therefore, it suggests opting for longer-term deposits, ensuring maximum profitability before the changes are consolidated.
That applies with time deposits but with demand deposits, checking accounts, it is similar. «Savings accounts are leaving behind the golden era of high returns, but they continue to be an interesting option for those looking to make their savings profitable with low risk. Today, some entities offer returns of between 3% and 3.30% APR, a figure that is especially attractive for immediate liquidity products. However, this opportunity has an expiration date,” says Helpmycash.
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