Euribor|On Monday, the three-month Euribor already fell below the one-year Euribor. “The market’s interest rate cut expectations have now melted as far as the ECB is concerned,” says OP’s senior market economist Jari Hännikäinen.
Home loans The 12-month Euribor, which is generally used as a reference rate in Finland, continues to rise. On Monday, the interest rate was recorded at 3.725 percent. The interest rate has now risen two days after the European Central Bank (ECB) announced last Thursday that it would lower its key interest rates by 0.25 percentage points.
After Thursday, the 12-month euribor has risen by 0.04 percent. The increase is not large, but it indicates that the market does not expect interest rates to fall at least for a while. The fact that interest rate derivatives have risen after Thursday’s decision also signals the same direction.
In high interest a significant turn can also be seen. The short 3-month Euribor has already fallen almost below the 12-month Euribor.
On Monday, the 3-month euribor hit 3.743 percent. The difference to the 12-month Euribor is only 0.018 percentage points. At the beginning of the year, the 3-month Euribor was almost 0.4 percentage points higher than the 12-month Euribor.
The interest rate differential is now the smallest since the end of November, when the 3-month Euribor rose above the 12-month Euribor.
Interest rate companies have an unpleasant consequence for mortgage debtors.
“The lowering of long-term interest rates below short-term interest rates suggests that the market’s interest rate cut expectations have now clearly melted as far as the ECB is concerned,” says OP Ryhmä’s senior market economist Jari Hännikäinen.
Three the month’s Euribor movements follow the ECB’s most important policy rate, i.e. the deposit rate of commercial banks, quite closely. It was lowered from 4 percent to 3.75 percent last week. The one-year Euribor, on the other hand, contains a certain kind of risk premium. Therefore, it is typically higher than the three-month interest rate.
Hännikäinen says that the evaporation of interest rate drop expectations can be partly explained by inflation trends in the euro area and partly by interest rate movements of the US Central Bank (Fed).
About 30 percent of Finnish housing associations have a mortgage.
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