The return from the summer holiday has brought good news for those who pay a mortgage or are applying for one to buy a home. At its latest meeting, the European Central Bank approved a new interest rate cut, the second this year.
Details of the interest rate cut approved by the ECB
The interest rate cut amounts to 25 basis points. Added to the previous reduction, approved in June, it has already been reduced by 50 basis points this year. Interest rates are now at 3.5%, still far from the levels of 2022. However, the downward path that has begun is a relief for mortgage holders.
The reason that has led the ECB to approve the reduction of interest rates is moderate inflation, far from the figures of just over a year ago. The ECB, however, has proposed to reduce it to 2%, which is why its officials are not advancing future decisions regarding the price of money.
The evolution of economic growth and inflation will determine whether, before the end of the year, the European Central Bank lowers the price of money again or maintains it at 3.5%. Another reduction is foreseeable before the end of the year if the economic situation does not change much. In the same fashion, that trend will continue in 2025. That's, at least, what the most optimistic forecasts expect.
Impact of the drop in interest rates on the property market
The drop in interest rates and the drop in the Euribor, which has already dropped below 3%, will impact the property market. The demand pent up by high interest rates could emerge, encouraged by better financing options. It could be an increase in demand not only from private buyers but also from investors.
Financial institutions have begun to make their move. Some have rushed to lower the interest rates on their mortgages, both fixed and mixed and variable. This circumstance could further encourage those potential buyers hoping for better conditions to purchase a home in a market that has resisted difficult economic circumstances.
Those who will soon benefit from the drop in interest rates are those with mortgages. Those who have to review their variable interest loans in the coming weeks could see their monthly payments drop by between 90 and 200 euros.
The right time to buy
The drop in interest rates and the greater ease of accessing and dealing with a mortgage loan is an incentive for those thinking of investing in housing. It is true that the forecasts point to new reductions. However, it is also true that with them and with a greater demand for housing, there is a possibility that prices in the real estate market will increase.
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