The European Central Bank (ECB) has confirmed the sad news that few people wanted to hear. The body responsible for managing the economic affairs of the European Union It will keep interest rates at 4.5 percent. This situation directly affects people who already have a mortgage loan or are considering applying for it. Moreover, ECB leaves uncertain future on what will happen in coming months. Not everything is bad for small savers, because Some indicators give good signals.
Interest rates Percentages expressing the cost and return of loans or other instruments offered by savings institutions. This means when we go to banks to request a mortgage, This indicator will tell us how much it will cost to request this. The higher it is, the greater the interest value of our loan will be, and with a lower figure, the loan will return with less interest. For a saver who keeps his money in the bank, The interest rate is the return that that deposit will generate..
Right now, ECB has had the highest interest rates in memory since 2000It even surpassed those recorded during the 2008 crisis. This was partly due to widespread price inflation in the Eurozone. caused by the tightening of tariffs. the effects of the war in Ukraine and the conflicts between Israel and Palestine for many exporting countries. This is leading European Central Bank leaders to protect the economy in the face of a very uncertain future 2024 unless this issue is resolved quickly. These 4.5% rates only increase the European Central Bank’s coffers to raise more money It will then be loaned to other organisations. The more you want, the more you have to raise it.
Here the US Federal Reserve also comes into play, playing a strategy similar to that of its European counterparts and It keeps them at 5.5% but is already warning of a possible decline in 2024.
How does this ECB decision affect us?
First of all, it should be said that the ECB clearly stated that: It will not reduce interest rates, at least in the “short term”. The direct decision leaves different possible scenarios depending on how 2024 begins, but the effects of the measure are clear. One of the most important is Euribor will continue to be quite highand people who want to apply for a mortgage to buy a house will have to pay very high interest if the mortgage is eventually granted.
Euribor is another indicator, but in this case Refers to the European Interbank Offered Rate, i.e. the price at which European banking institutions lend to each other. It is calculated daily and then the monthly average is taken. This is very important and will determine the most profitable type of mortgage at that time. There are three options:
- Still: Interest percentage is maintained throughout the loan
- Variable: Euribor is reviewed periodically (once or twice a year)
- Mixed: It is a mixture of both. At first he uses the fixed system, but after a few years he switches to the variable system.
Currently, in December 2023, Euribor is at 3.76%A figure that has fallen despite the ECB’s decision. During November, The average was 4.022%, peaking at 4.15% on some days.. While experts warn that mortgage loans will suffer greatly in 2024 if the situation remains the same, they also see hope for a possible decline.
Source: Informacion
James Sean is a writer for “Social Bites”. He covers a wide range of topics, bringing the latest news and developments to his readers. With a keen sense of what’s important and a passion for writing, James delivers unique and insightful articles that keep his readers informed and engaged.