The European Central Bank is expected to announce a 0.25% interest rate cut today, marking its fourth reduction this year and bringing the total decrease to 1% since June, offering the first significant relief for borrowers.
Markets anticipate further rate cuts continuing into 2025, with rates expected to approach 2%. Analysts forecast the Euribor rate to decline to an average of 2.46% in the second quarter of 2025 and 2.35% in the fourth quarter.
With inflation stabilising near the 2% target and the eurozone economy showing signs of strain in recent months, according to Eurostat data, economists view rate cuts as inevitable to improve prospects for businesses and households.
Recent political crises in Germany and France, the eurozone’s largest economies, have made monetary policy easing more crucial due to their negative impact on economic performance.
The impact on Cypriot borrowers will vary depending on loan type and origination date.
Central Bank data shows the average market rate for new or renegotiated mortgages was 4.62% at the end of October.
For example, a €200,000 mortgage with a 20-year term at this rate currently requires monthly payments of €1,279, which would decrease to €1,252 with the expected 0.25% cut.
However, some borrowers are paying higher rates of 6% or 6.15% on older mortgages, translating to monthly payments of €1,434 or €1,452 respectively for a €200,000 loan. The anticipated rate cut would reduce these payments to approximately €1,400.
Separately, loans tied to Euribor rates, while often moving similarly to ECB rates, operate on a different timeline with changes taking longer to affect borrowers as they are priced quarterly, semi-annually, or annually.
Read more:
