The European Central Bank has announced a further cutting of interest rates, bringing the reference parameter to 2.75%. During the press conference following the Board of Directors, President Christine Lagarde expressed optimism regarding the trajectory of inflation in the euro area: “Many basic indicators report that inflation will be at our 2% target in a sustainable way in the medium term”.
Lagarde highlighted thatalthough the data on the growth of GDP in the euro area show signs of weakness, this does not imply an arrest of the recovery. He said that consumer trust could be decreased, but the labor market remains robust, which, together with the expected wage increases, could stimulate consumption and strengthen the economy. “The recovery is underway,” he said, underlining a transition from a 2023 characterized by modest growth to a 2024 with an almost double growth.
Despite the positive prospects, Lagarde has maintained a certain caution regarding future interventions. He recalled that the eurozone is still in restrictive territory, making prematurely discuss a possible stop to the cuts. Today’s decision to reduce 25 points rates was unanimously taken and brings the total cuts to 125 basis points compared to the peak.
With regard to Crypto Asset, Lagarde expressed skepticism regarding their possible use in the reserves of European central banks, stating that the reserves must be liquid and safe.
For the mortgage market, the new rates cut represents positive news. With the amount of installments and interests destined to descend, the rates on mortgages have already dropped at an average of 3.23% in November, compared to levels exceeding 5% in 2023. It is expected that they can drop below 3% , leading to significant savings for borrowers.
A concrete example: for a 25-year real estate loan of 200,000 euros, the total savings could approach 83,000 euros (-22.8%). Even for a car financed in installments, costs could decrease by over 11,871 euros (-24.2%) compared to last year.
According to Mutuionline, 1 and 3 months Euribor rates are already starting to go down, with further expected drops. For those who opt for a variable rate mortgage, savings could translate into lower installments, with an estimated total benefit of up to 4,700 euros on the interests of a 150,000 euro mortgage lasting 20 years.
In conclusion, the recent cut of rates by the ECB not only strengthens economic perspectives, but also represents a significant opportunity for consumers, with direct impacts on mortgages.