Is now a good time to take out a variable-rate mortgage? Euribor forecasts

How will the cost of variable-rate mortgages vary in the coming months? To predict this, it is necessary to analyse the central forecasts on Euribor, the European reference interest rate.

What the latest forecasts tell us about the Euribor, or Euro Interbank Offered Rate, which is the average interest rate paid by banks in the eurozone to lend money to each other and the benchmark for variable-rate mortgages.

In recent months, Euribor forecasts, particularly three-month ones, have attracted the attention of many financial industry experts, who have analysed various factors to predict future fluctuations. What is the current Euribor forecast for the last months of 2024?

Euribor forecasts: what will happen in the short term?

The first actor to provide its Euribor forecast is, as one would hope, the European Union, through the ‘Spring 2024 Economic Forecast’, a report analysing, in a broad sense, the economic situation in Europe. 

The executive summary of the document provides an overview highlighting the most important data for the Union, such as the Gross Domestic Product (GDP) growth rate and the inflation rate. It also includes some forecasts on Euribor and the factors that will influence it. 

Of course, the future of the Euribor is closely linked to the decisions of the European Central Bank (ECB) regarding interest rates. These were already reduced by 25 basis points in June and currently stand at 4.25%. According to the Union, these will reach the threshold of 3.2% by the end of the year and 2.5% by the end of 2025.

Chatham Financial expects Euribor to decrease to 3% by early 2025 and 2.7% by the end of next year. 

Erste Group, one of the leading financial institutions in Central and Eastern Europe, has a slightly more optimistic Euribor forecast. After the first interest rate cut in June, the lending institution expects Euribor to reach 3% by the end of the year and 2.6% by July 2025.

Most banks and credit institutions’ forecasts for the last months of 2025 are similar. They all expect the three-month Euribor to fall, possibly dropping below 3% after next summer. This suggests easing the ECB‘s restrictive monetary policies in response to lower inflation.

The impact on variable-rate mortgages

Why are Euribor forecasts important for those who have taken out a variable-rate mortgage or intend to do so shortly? Because the mortgage cost varies precisely according to the fluctuations of this value. Therefore, a decrease in Euribor would reduce the monthly mortgage instalments, thus enabling holders of variable-rate mortgages to save money.

In short, the Euribor forecasts suggest that a favourable market phase for variable-rate mortgages is ahead of us after a few years of very steep repayments! As mentioned in the previous paragraphs, this trend is closely linked to ECB policies and global economic conditions. This information is crucial for borrowers to plan their finances better and consider possible switches to fixed-rate mortgages if more stability is desired.

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