The European Central Bank (ECB) has adopted its fifth consecutive decrease in interest rates to leave the price of money in the 2.5%. A new cut of 0.25 percentage points that, among other things, increases the type differential with the American Federal Reserve.
When the monetary institution based in Frankfurt Touches the types, the impact is felt on mortgages. In this case, the decision has been to continue with the cuts of the price of money and that will mean that the loans for housing buy continue down, both the new and those that are alive for the effect it has on the Euribor, the main reference index.
Mortgages are one of the products that are most focused by being the most widespread credit in society. The impact of ECB types on housing loans is on the Euribor, which is actually the price at which banks are lent to each other and used as a reference for mortgages. In this sense, if the monetary organization lowers types, the Euribor usually does the same, although it is true that the index is usually anticipated to the decisions of the Governing Council.
For practically everything 2024, the Euribor was down since it soon began to discount that the ECB would initiate, as finally happened, the cut of money. But in January there was a slight change of trend. Since then, the index has been installed between 2.4 and 2.5%, dimensions very similar to those carried by this March.
What seem to increase the Euribor is that despite the decreases of January and March types, the Central Bank will not make as many cuts this 2025 as expected a few months ago. Hence the brake on the most used index for mortgages. In any case, the performance of the Euribor still reduces housing loans since in most cases the mortgage is updated from one year to another, and in the interannual comparison it is registered down.
An average mortgage of 150,000 euros, at 25 years and an interest of Euribor plus 1% differential had a share with the March of 2024 of 850 euros per month. Now, in that same loans but with the current Euribor in the environment of 2.4% the average monthly fee is 743 euros. This is a savings of 107 euros approximately a month with respect to how the index was last year.
In the new mortgages, the decision of the ECB also has impact since the banks adapt their commercial offer, mainly the fixed type. In this sense, if the types go down, it is also expected that new housing loans will continue to make it.
Facing the coming months, the stagnation of the EURIVOR In current dimensions, in anticipation that the ECB will not go down so much the types. But, in any case, analysts suggest that the index could end the exercise in 2%.
Beyond the mortgages, the decreases of ECB types also impact on the cost of loans to companies and consumer loans for families. An impact that translates into a lowering of them. Also in the deposits the effect of the price cut by the Central Bank of the Single Currency Zone is appreciated. If the types lower, so will what the financial institutions pay to their clients for the deposits.
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