Interest rates continue to fall – an interest rate adjustment can now bring savings of thousands of euros

Home loans The decline in the Euribor, used as a reference rate, continued on Friday. Finland’s most common reference interest rate, the 12-month Euribor, fell on Friday for the seventh day in a row. The interest rate was quoted at 2.475 percent. The last time the interest rate was lower than today was more than two years ago, in October 2022.

The one-year euribor has already fallen by almost 1.6 percentage points in a year. It means that the interest rate revisions in the next few days will bring Finns significant reductions in housing costs.

One year Euribor is by far the most used reference rate in Finland. Most mortgages are so-called annuity loans, where interest rate fluctuations change the payment installment, but the loan period remains the same. For example, in the case of an annuity loan of 300,000 euros, the current interest rate reduction reduces the expenses used for housing by already thousands of euros annually.

On Friday, the 3-month Euribor also fell below 3 percent. It can be considered a significant borderline, as the three-month Euribor has been continuously above one percent since the end of March 2023.

3 Three-month euribor is considerably rarer than one-year euribor.

Market expect interest rates to drop significantly from the current level. For example, based on interest rate derivatives, the 3-month Euribor is expected to be around 1.8 percent a year from now.

This year, the European Central Bank (ECB) has lowered its most important key interest rate, i.e. the interest rate on banks’ overnight deposits, from 4 percent to 3.25 percent.

Interest rate derivatives tell us that the market expects the ECB to lower its interest rates quite a bit more. The next interest rate cut from the ECB is expected a little before mid-December.