Last week European Central Bank (ECB) did not disappoint and lowered interest rates after two years of increases as planned. The monetary subject reduced the price of money by a quarter point, from 4.5% to 4.25%, the first drop in eight years. But, How will this decision affect the daily lives of eurozone citizens? Backinter explains the key implications for mortgages and consumer credit.
Falling interest rates basically force people to pay less for a loan or mortgage. However, it must also be taken into account that The fall has been minimal and Euribor, the index on which most variable mortgages in Spain are based, has already retreated from its highs several months ago.
. Specifically, the 12-month Euribor rate ended May at 3.68%, down from the 4.15% reached in July 2023, the highest since 2008.That’s why, If you already have an adjustable rate mortgage, it’s likely that your payment will continue to decline slightly. “It must be taken into account that Euribor, the indicator that serves as a benchmark for the repayment of mortgages, represents the interest rate at which financial entities lend money to each other. If creditor banks suffer from a decline in the value of money through ECB rate cuts, this decline is passed on to the market or even anticipated, as we have seen,” Banker explains. Nevertheless, Those with a fixed-rate mortgage will not see any changes.
in their quota, because that’s what they agreed with the bank.If you’re looking to take out a mortgage to buy a home, new loans, both fixed and variable, have slightly lower interest rates.. “That is, borrowings may become somewhat cheaper, but the movement will be insignificant. In the future, everything will depend on how interest rates and Euribor will develop,” warns Bankinter. Despite its decision to cut rates, the ECB has rejected the possibility of further rate cuts in the near future while waiting to see how inflation and GDP develop. In this sense, it even delayed its 2% inflation target until 2026, twelve months later than originally planned.
For consumer loans have already been signedA rate cut will have little effect on your interest because most of them are usually fixed.
However, it is advisable to familiarize yourself with the terms of the contract. “If you are going to order a newDue to their urgency and repayment period, consumer loans are very sensitive to falling rates, so you are likely to see them slightly more moderate interest rates“adds Bankinter.Original film screenwriter Aline Brosh McKenna will be in discussion to write the next film,…
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