Euribor|The one-year euribor has already dropped to almost 2.5 percent. The market expects that the three-month euribor, in particular, will soon drop very quickly.
Finland the most popular mortgage reference interest rate, the 12-month Euribor, continues to fall. On Tuesday, the one-year euribor was already quoted at 2.502 percent. The last time the interest rate was this low was at the beginning of October 2022. It is possible that the interest rate will already fall below the 2.5 percent mark this week.
The one-year euribor has plunged very quickly since the summer. The interest rate has fallen by more than 1.2 percentage points since the beginning of June. Compared to a year ago, interest rates have already increased by more than 1.5 percentage points. The bill easily means a drop of hundreds of euros in monthly housing expenses.
The market expects interest rates to continue to fall. The 12-month Euribor is expected to close to around two percent in a year’s time.
In the case of shorter interest rates, the decrease is expected to be significantly faster.
The three-month euribor was quoted at 3.034 percent on Tuesday. Based on interest rate derivatives, the market expects that the three-month Euribor will drop to around 1.8 percent in a year’s time. The decline is expected to be particularly rapid in the next six months, as the three-month Euribor is expected to fall to around two percent by mid-May.
Three The one-month euribor follows the European Central Bank’s (ECB) key interest rate, i.e. the banks’ overnight deposit rate, quite closely. The interest rate is now 3.25 percent. Based on interest rate derivatives, the market expects the ECB to make significant reductions in its key interest rates.
The ECB will next discuss its key interest rates shortly before mid-December. It is likely that the ECB will lower its interest rates by 0.25 percentage points at that time as well. The expectation is that interest rate reductions will continue even after that, but it is not certain.
The strength of the interest rate cuts depends, among other things, on the inflation trend in Europe and the strength of economic growth. Also last week re-elected president of the United States Donald Trump economic policy can affect the ECB’s monetary policy and thereby also the daily life of Finnish mortgage borrowers.
A year euribor is by far the most used reference rate. According to the Bank of Finland, approximately 78 percent of the new housing loans concluded in euros were tied to the Euribor for the year. The share of the three-month Euribor was around 14 percent.
About 30 percent of Finnish households have a mortgage.