The Euro Zone Continues To Push Down Mortgage Rates For The Sixth Consecutive Record Low

2021-01-30   |   by CusiGO

There seems to be no end to the downhill index for calculating variable mortgage rates. It started early last summer and hasn’t stopped, but experts predict it will. It was in June that the euro zone embarked on a downward path, from – 0.081% last month (the highest since December 2016) to – 0.504% this month due to the lack of data on Friday, the sixth consecutive all-time low in the euro zone. The ECB wants to ensure continuity of stimulus in the coming months, which will be reflected in the stagnation of current values in the eurozone. However, the impact of its collapse is obvious: on the one hand, the prices of variable rate mortgages have dropped significantly; on the other hand, the eurozone banks have indirectly exerted downward pressure on fixed rates.

That way, if new variable mortgages become more attractive, those who review old loans this month will experience particularly good discounts on their instalments. For a 30-year mortgage of 300000 euros, the interest rate is in euros, plus a 0.99% interest margin (one of the most common interest margins), and this year’s savings will be 373.92 euros, or 31.16 euros per month, because according to the iahorro bank comparator, this proportion will rise from 929.60 euros to 898.44 euros at present. This is because in January, the index was 2.5 percentage points lower than a year ago (0.253%).

In this case, in order to cope with the decline of profit margin of this product, banks will continue to bet on fixed interest rate through very attractive transactions, which guarantees them higher income. As a result, Simone columbelli, head of mortgage at iahorro, believes that there is now “a great opportunity to sign a fixed mortgage agreement and always take advantage of abnormally low interest rates.”. On the contrary, in his words, the variable mortgage is undoubtedly “an interesting product”, but it is more “for a less risk averse person, they want to repay the loan within 10 or 15 years”, so as to avoid the impact of the long-term appreciation of the euro zone.

The comparison also indicates the merger of subrogation transactions, that is, the transfer of mortgage from one entity to another in exchange for more favorable conditions for users. “Given the impact of recent developments in the euro area on mortgage rates, we are faced with a wide range of options for improvement,” highlighted colombelli, So it’s no wonder they’re trying to do it with mortgages, too. ”

But how long might it take for the eurozone to return to the positive areas it abandoned nearly 15 years ago? “Year,” they said, from the Department. So far, the index has fallen modestly, with January down only 0.7 basis points (- 0.497%) from December. “Their land is – 0.50%,” said disc Joaquin Robles, an analyst at XTB, a financial brokerage. Since the euro area is the lending rate between European banks, including European banks, it is meaningless for them to do so at a price higher than that charged by the European Central Bank for depositing excess liquidity in its Treasury (i.e. 0.50%), because the guarantee provided by the regulators is insurmountable.

As a result, Robles ruled out the possibility that the eurozone might fall further, although he did not see a sustained rise in the short term. On the contrary, in the next few months, the index will move steadily around the threshold reached in January until Frankfurt policy changes significantly. “This trend will continue because the ECB will inject liquidity into the banking sector at a rate more favorable than interest rates and deposit rates, at least by June 2022,” Robles said.

To be sure, Klaas knight, governor of the Dutch Central Bank, said in an interview with Bloomberg on Wednesday that the ECB “still has room to cut interest rates” and cut interest rates to – 0.10% or deposit rates to – 0.60%. In this case, Euribor may find new soil in the range of – 0.60%. However, “it won’t happen,” Robles said. “Last week, after the meeting of the supervisory board, Christine Lagarde, President of the European Central Bank, said that she would continue to monitor the situation, that she was worried about the third influenza pandemic, that she would continue to maintain the debt purchase plan if possible, and that she was making every effort. He can’t do it any more, “the analyst stressed.

Therefore, he believes that “banks will continue to bear the current excess liquidity, while the economy will wait for the rebound of the sharp decline of the stock market.” The second half of 2021 has been discussed, and there will be no new developments in the eurozone for the rest of this year because of the delay in vaccines and the third wave of infectious diseases. “