Today, 12 December 2024, the European Central Bank meets to decide on a possible interest rate cuta move that could have a significant impact on mortgages and, more generally, on European families.
After months of suffering for those who have taken out a variable rate mortgage, the prospect of lighter installments is becoming more and more concrete.
But what would be the effects of this decision? And how might the real estate credit market change in the near future?
Advertisement – Advertising
The ECB rate cut
The possible reduction in the deposit rate by 25 basis points, bringing it from 3.25% to 3%could represent a significant turning point for the mortgage market, especially for those who have chosen or intend to subscribe to a variable rate. This decrease, expected by many operators in the sector, would translate into immediate savings on monthly installments: for a twenty-year mortgage of 150,000 euros, estimates indicate a reduction of between 20 and 30 euros per month.
The installment, for example, could drop from the current ones 892 euros to approximately 861 eurosoffering tangible relief to families.
In the long term, the impact could be even more significant: total interest savings would be around 4,500 euros for those with an existing mortgage and could be slightly higher for new contractors. This dynamic makes the rate cut an opportunity not only for those who already benefit from a variable rate, but also for those who are considering a subrogation, i.e. the transfer of the mortgage to more advantageous contractual conditions.
Furthermore, any intervention by the ECB could bring attention back to the variable rate, making it a once again interesting option for those looking for flexible and savings-oriented financial solutions, in a context that appears less uncertain than in the recent past.
Advertisement – Advertising
A comparison with the past
Although the possible rate cut could represent a positive turning point, current conditions still remain distant from those of the years preceding 2022. Before the ECB started its policy of raising rates to combat inflation, mortgage payments were significantly lower.
In 2022, for example, the average installment of a standard mortgage was around 456 euros, a value that today has almost doubled for standard variable rate mortgages, with installments standing at around 682 euros.
However, 2024 has already shown signs of improvement. Average installments fell by around 66 euros over the year, going from 748 euros to 682 euros, a decrease which contributed to easing the pressure on families.
Although the road to return to pre-2022 levels is still long, these positive trends indicate that the ECB’s policies are starting to bear fruit, paving the way for a more sustainable real estate market.
Advertisement – Advertising
Towards a rebalancing between fixed and variable rates
Another interesting aspect of the potential rate cut concerns the possible rebalancing between preferences for fixed-rate and variable-rate mortgages. In recent years, the fixed rate has been the predominant choice for borrowers, thanks to the stability of the installments and the lower risk of unexpected fluctuations.
However, with the lowering of interest rates and the gradual reduction of inflation in the Eurozone, the variable rate could once again attract a significant portion of consumers.
According to experts, the market could reach normalization by the end of 2025, offering consumers a more balanced range of options. This would allow a greater possibility of comparison between the different offers and a choice more targeted to the specific needs of each borrower.
The recovery of the variable rate, combined with a less unstable economic context, could also encourage greater competition between credit institutions, translating into increasingly advantageous contractual conditions.
