The new ECB rate cut, the fourth in 2024, is good news for the real estate market. With the reduction in interest rates by 25 basis points, the price of money is 3%. However, along with this decision by the European Central Bank came another news that was not so positive: the reduction in economic growth expectations for the Eurozone.
Evolution of interest rates
If 2023 was a year of highs, 2024 has been marked by the ECB's rate cut. The latest one sets the price of money at the levels of March 2023. Forecasts indicate that this fall will continue throughout 2025 until it reaches 2%.
The ECB's rate cut has dragged down the reference index for calculating mortgages. Thus, the Euribor is already around 2.4%, far from the 3.6% of January.
Repercussions of the ECB rate cut
Regarding the property market, the ECB rate cut will have positive consequences in some cases but not all. On the one hand, those with a variable-rate mortgage will find some relief. On the other, the lower cost of mortgage loans will mean better financing conditions and more flexible criteria for accessing a mortgage.
Increased demand and prices
The logical consequence of this ease of access to financing will be a rise in demand. That will translate into growing housing prices, especially in real estate markets such as the Spanish one, where demand is much higher than supply.
In this sense, the ECB's rate cut throughout 2024 has already shown some effects. Firstly, there has been an increase in the number of property transactions. According to data from the National Institute of Statistics (INE), home sales in October soared by 51.3% year-on-year.
The second most significant effect already palpable is the price of housing. According to the Housing Price Index, the annual rate of change in the third quarter of the year was 8.1%.
Lowering growth expectations
However, in this scenario, we must consider another factor: a somewhat slower than initially expected recovery of the economy. Therefore, that could act as a brake.
If these forecasts come true, traditional investors in the real estate market may slightly withdraw. Perhaps also the demand from individuals who are hesitating between buying a house or waiting. We'll have to wait to see how the economy evolves and how the markets respond.
In any case, the real estate market is experiencing a period of growth. Therefore, it is a good time to consider buying a home. At Spainhouses.net, we help you by showing a wide and varied real estate offer just a click away.