Interest rates | The rapid rise in the mortgage interest rate stopped – the Euribor is expected to remain almost unchanged for the next six months

Finland the sharpest rise in the most popular mortgage interest rate, i.e. the twelve-month Euribor interest rate, is behind us, but the rise is not over yet, economists estimate.

The one-year euribor has been running at 2.8 percent in November for the last two weeks, which means it has remained unchanged for the longest time this year.

“The biggest rise in the twelve-month Euribor seems to be over. It remains to be seen whether the euribor will stop completely here or whether the interest rate will rise further, but most of the interest rate increase is behind us”, opines the OP group’s chief economist Reijo Heiskanen.

Based on interest rate derivatives, the market expects the twelve-month Euribor to remain around three percent for the next six months. However, market expectations vary from week to week depending on whether economic growth slows down in the euro area and what the inflation outlook is.

“With these prospects, there would not be much of a rise in the twelve-month Euribor, at least in the next six months, even though views on the development of interest rates are somewhat divided,” says Heiskanen.

Euribor-interest rates have risen at a record fast this year, because the interest rates have anticipated the tightening of the European Central Bank’s (ECB) monetary policy.

At its rate meeting at the end of October, the ECB decided to raise its deposit rate by 0.75 percentage points for the second time in a row. The central bank is trying to curb the rapid inflation in the euro area with huge interest rate hikes.

Handelsbanken’s chief economist Timo Hirvonen says that market expectations of a rise in the twelve-month Euribor have decreased in the fall.

“The market expects the Euribor interest rates to rise a little more, but the expectations have clearly come down,” says Hirvonen.

Earlier this year, interest rate derivatives predicted that the twelve-month Euribor would rise to 3.5 percent, but now the expectation is that the interest rate would be 3.1 percent in June.

Expectations from the rise in euribor have come down after the threat of a recession in the euro area intensified in the fall. Weak economic development would slow down inflation, and thus the ECB would not need to raise its interest rates so strongly.

The majority of economists estimate that the ECB will slow down its pace of interest rate hikes from now on.

The majority of economists in a survey compiled by the Reuters news agency expect the ECB to raise its deposit rate by 0.5 percentage points at its next meeting in December and that the rate hikes will continue in the first quarter of next year.

These rate hikes are expected by the market, so they are already priced at euribor rates.

“There will undoubtedly be an interest rate hike in December and after that at least at the beginning of the year. Several larger policy rate increases have been priced into market rates,” Heiskanen says.

of the ECB Recently, conflicting messages have been heard from decision-makers about the size of the next interest rate hike.

Governor of the Austrian National Bank Robert Holzmann said the British newspaper Financial Times in the interviewthat he supports the continuation of interest rate increases by 0.75 percentage points.

Instead, the Governor of the Central Bank of Portugal Mario Centeno said in a speech on Monday that the next rate hike should be less than 0.75 percentage points.

CEO of the Bank of Finland Olli Rehn on the other hand, said on Tuesday in the parliament that the pace of raising key interest rates depends on how the economy develops.

Read more: The Governor of the Bank of Finland, Olli Rehn, predicts more interest rate hikes – “The outlook for the European economy is bleak”