Euribor|The one-year euribor already fell below 2.7 percent on Friday.
Finland the most popular mortgage reference rate, the one-year euribor, already fell below 2.7 percent on Friday. The interest rate was quoted at 2.69 percent on Friday.
The interest rate has been falling rapidly since the summer, because even at the beginning of June the euribor for the year was one percentage point higher than today.
The drop means that those checking their interest rates now pay significantly less interest on their loans than those checking their loans at the beginning of June.
“The 12-month euribor continued to fall today, even though the ECB’s interest rate cut expectations have not increased in recent days. On a daily basis, Euribor movements do not always correspond to the movements of more frequently quoted market interest rates. The current level is already below our new forecast,” wrote Nordea’s chief analyst Jan von Gerich message service in X.
The market expectations of the rate cut by the European Central Bank (ECB) have not increased in recent days, but in the last month expectations of a cut have clearly accelerated. The market expects the three-month Euribor, which follows the movements of the ECB’s key interest rate, to fall to around 2.2 percent in half a year. At the beginning of September, interest rate derivatives priced the three-month Euribor to fall to around 2.6 percent in half a year.
On Thursday, the three-month Euribor was at 3.238 percent.
The ECB’s most important policy rate, i.e. the policy rate for banks’ overnight deposits, is now at 3.5 percent. In practice, the market therefore expects the ECB to lower the interest rate by 0.25 percentage points in five meetings in a row. The ECB will next make monetary policy decisions in October, December, January, March and April.
The market’s expectations about the development of interest rates are not a forecast of future development. Over the past few years, the market has predicted the development of interest rates in places badly wrong. Expectations should be treated as an educated guess about future events.
At this point, at least the October interest rate cut seems quite likely. For example, the CEO of the Bank of Finland Olli Rehn said on Tuesday that he thought the ECB should cut its key interest rate by 0.25 percentage points at that time.
The news is updated.
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