2024-09-28 21:43:23
Good news for those with a floating rate mortgage: Euribor is expected to close in September below 3%, close to 2.9%. It’s something that hasn’t happened since November 2022.
Financial markets are already predicting a collapse in Euribor, driving the mortgage rate below 2% in 2025 – around 1.8% at the end of next year.
Experts had predicted that Euribor would end 2024 at 3%, but the speed at which the ECB’s rate cuts are increasing suggests that the benchmark for most mortgages will remain below that level. Bankinter analysts even estimate that Euribor will end the year at 2.75%.
“This downward trend experienced by the Euribor directly affects mortgage installments, both in their six-monthly and 12-monthly revisions,” market players explain to Nautemporiki.
“An example, for a mortgage loan of 140,000 euros for 30 years with a difference of 1% from Euribor, with reference to the index of September 2023, which was at 4.149%, the monthly installment was 757.81 euros.
Now with Euribor in September 2024 at 2.945%, the mortgage installment of owners who had a review this month will fall to €632.06, meaning they will pay €125.81 less.
Why has it fallen so much?
The sharp declines in Euribor are due to the fact that both the ECB and the Fed cut interest rates this month. The European Central Bank was the first to do so with a reduction of 25 basis points, but the Fed proceeded more aggressively with a cut of 50 basis points, thus putting pressure on the ECB so that a new cut at the October meeting is not ruled out. Financial markets are even discounting sharp interest rate cuts that could accelerate the fall of Euribor.
Another 50-point cut by the Fed
For the Federal Reserve meeting on November 7, markets expect another 50 basis point cut.
In the case of the ECB, which has even more influence on the development of Euribor, a move of a similar size to that of the Fed is already beginning to be discussed in two installments of 25 points – in October and at the December 12 meeting.
The prospect of an interest rate cut by the ECB again in October is strengthened by the fact that inflation is falling more than expected in France and Spain – the second and fourth economies of the eurozone. In France, it slowed significantly in September, recording an annual growth rate of 1.2%, compared to 1.8% in August, while the market expected 1.6%.
Also in Spain, inflation was 1.7%, down significantly from 2.4% in August and forecast to ease at a slower pace to 1.9%.
“bury the hatchet”
“The reaction of the markets was immediate, as they are now betting on a third interest rate cut by the ECB, equal to 25 basis points, at the meeting on October 17, making the probability of it jumping over 70%, from just 20% earlier this per week. “This time, it’s not the hawks who are shouting in Frankfurt, but the doves, who have long been asking the European Central Bank to bury the hatchet that Lagarde wielded against inflation for two years,” note the market players. .
An ECB survey in August on consumer expectations and perceptions of inflation in the eurozone showed a further drop to 3.9%, compared to 4.1% in July, confirming a continuing downward trend.
Consumer perceptions of past inflation have actually slipped as much as 4.5 percentage points from a peak of 8.4% in September 2023. These numbers mean that consumers in the Eurozone expect the deflationary process to continue. as the macroeconomic data have been pointing out for some time now.