Banks expect rate cuts and cheaper mortgage loans

The ECB will meet this Thursday to review interest rates, and the market believes they are likely to remain unchanged at 4.5%. According to Olivia Feldman, economist and co-founder of HelpMyCash.com, “The ECB doesn’t like to surprise the market, and Christine Lagarde has already said that if it starts cutting interest rates, it will only be in the second half of the year.” Although the goal of keeping eurozone inflation at 2% by 2025 is close, prudence is leading banking authorities to avoid immediate changes. “If rates come down sharply now, we risk inflation skyrocketing again,” Feldman warns.

However, Spanish banks have decided to get ahead of the inevitable fall in money prices and started the year by significantly cutting mortgage lending as part of their bid to attract new customers. According to HelpMyCash, many institutions have reduced interest rates on all their home loans, with the fixed rate being the most favorable.

In an environment of declining mortgage lending volumes (precisely due to their rising prices), Banco Sabadell, for example, surprised with a 0.60 point reduction in its 30-year fixed mortgage (from 3.40% to 2.80%). ). Bankinter also joined in, lowering its 20-year fixed mortgage from 3.60% to 3.30%, and Evo Banco did the same, lowering the interest rate from 3.35% to 2.90% on its 30-year mortgage.

While the improvements mainly focus on fixed rate offers, HelpMyCash highlights that some banks also cut prices on mixed mortgages in January. For example, two companies have reduced their initial fixed interest rate for the first ten years: Bankinter (from 3.30% to 3.20%) and ING (from 3.65% to 3.40%).

Other companies also improved their variable mortgages in January. Kutxabank and Banco Sabadell, for example, reduced the initial fixed rate applied in the first year: from 2.82% to 2.58% and from 2.89% to 2.65%, respectively.

“These are general terms advertised by banks, but in the current context where they are competing to attract customers, it is vital to compare mortgages and negotiate with banks to get more competitive leads or fewer bundled products, especially if you have a good profile.” , warns Feldman.

Additionally, Euribor has begun to decline and those with adjustable rate mortgages may begin to breathe. The preliminary average for January is 3.6%; after reaching its maximum value (4.160%) in October 2023. “Mortgagors who review their payments every six months will start to see a reduction from now on. Those with an annual review will still see their fees increase, albeit much more moderately than in 2023,” says Feldman.

Deposits in free fall

But it is not only Spanish banks that are predicting rate cuts. In fact, the rest of Europe also did the same, and this had a direct impact on the deadlines. “Unfortunately, most entities have already begun to reduce the rewards on their deposits, but there are still attractive products with a yield of about 4%,” says the co-founder of HelpMyCash.

Portugal’s Bai Europa and Italy’s Banca Progetto are among the institutions that continue to offer attractive twelve-month yields of 4.20% per annum and 4% per annum respectively. Both can be negotiated through the Raisin platform.

“With interest rates falling, which we are likely to see from the summer, to get the 4% reward you will have to take risks by investing, for example, in the stock market. That’s why it’s advisable to take advantage of this latest period of high interest rates to grow your savings without taking on virtually any risk,” emphasizes Feldman, who emphasizes that these products, even if from other European countries, are protected up to $100,000. euros per bank and holder, thanks to the Guarantee Fund.

Another option to increase your savings is to choose paid accounts, which also offer returns of up to 4%. But Feldman said it’s worth considering that these products “could reduce profitability at any time if given two months’ notice.” Deposits record their performance from the very beginning and throughout the entire established period.

On this basis, the co-founder of HelpMyCash assures us that we are experiencing a change in the economic cycle, which will entail transformation in both the mortgage and deposit markets. “It is advisable to pay attention to the news in order to effectively manage our money in the coming months,” he concludes.