The ECB cuts rates by 0.25%, stops the rise in home mortgages. Giorgetti: “It’s About Time”. But who benefits and how much

The Eurotower announces the change of pace in the cost of money after 9 consecutive increases. Save up to 28 euros per month on the variable rate instalment

ROME – A breath of fresh air for those who now found their mortgage payments unaffordable. A breath of optimism for those who have thought about buying a house, but haven’t decided yet. The fact is that the awaited ECB decision marks a change of pace for the financial and real estate markets and for the lives of many families in the Eurozone. For the first time after 9 consecutive increases, to chase inflation – which has now been at a standstill for 9 months – Christine Lagarde, president of the European Central Bank, has finally announced the cut in the cost of money of 25 basis points(0.25). The main refinancing rate therefore drops to 4.25 percent, the marginal refinancing rate to 4.50 percent and the deposit rate to 3.75 percent. This is the first cut since March 2016, both for the rate on main refinancing operations and for the marginal refinancing rate, while for the rate on deposits it is the first reduction since September 2019.

MINISTER GIORGETTI: “IT’S TIME, IT’S JUST THE FIRST STEP”

A long-awaited contraction that is welcomed by consumer associations, the business world and institutions. Even the Minister of Economy and Finance, Giancarlo Giorgetti, joins the chorus. “The ECB has finally cut rates – he declares – An expected, timely decision, consistent with the current situation and, looking at the excellent data on the reduction of inflation in Italy, well below the euro area average… also necessary “. In short, for the minister “It’s about time – he comments – We hope that this is only the first step in this direction”.

WHAT CHANGES FOR THOSE WHO HAVE HOME LOANS

It is in fact a first but important step, as the minister points out, a sign of a reversal of the trend of recent years, linked to the trend of inflation. The advantages may materialize for families, given that indebtedness conditions will change for mortgages, consumer loans, leasing installments and loans for cars and household appliances, and finally returns of government bonds and corporate bonds.  

In particular, to explain the effects of the Eurotower’s cut on home loans, which have undergone a real surge in the last two years, Mutui.it, first of all clarifies who can really benefit from it. That is, “they could, paradoxically, be those who do not yet have a mortgage, but intend to take out one at a fixed rate in the near future”.  In this case, in fact, rates could lower “in anticipation of a market trend that could improve following the greater liquidity in circulation”. Otherwise, those who already have a mortgage, if this is at a fixed rate, will not have any benefits because the Eurirs – i.e. the reference rate for this type of financing – is immune from changes in ECB rates. Same thing for those who hold a variable rate mortgage which has the Euribor as reference, i.e. the interbank rate established daily which “measures” the cost of money not for the ECB, but for loans between bank and bank.

ADUSBEF-FEDERCONSUMATORI: SAVINGS OF UP TO 28 EUROS PER MONTH FOR MORTGAGES AT 3.75%
Those who have already taken out a variable rate home loan indexed to the Frankfurt rate. Adusbef – Federconsumatori estimates for this category up to 28 euros per month, 336 euros per year, for a mortgage at 3.75% – which is reduced by 0.25% to 3.50% – from 200,000 euros at 30 years. The drop in installments is more limited however for a 10-year 100,000 euro mortgage, estimated at 11 euros per month (132 per year). But according to the consumer association, these “lucky ones” will only be 2% of the total mortgage subscribers .

Finally, facile.it highlights the starting point: in less than two years, those who have signed up for an average mortgage of 126,000 euros in 25 years (LTV 70%) we have in fact seen a increase in the installment by over 60%. And even if a “significant decline in installments” is now on the horizon, it is noted that to have palpable advantages, it will be necessary to be patient a little longer. And it also looks at the Euribor, for which, analyzing the performance of the Futures on them, “an interesting picture emerges: the average instalment, which reached 747 euros in May 2024, could decrease overall of approximately 37 euros by the end of the year and of 55 euros by June 2025, thus reaching 692 euros in 12 months”.

The hope therefore from many quarters is that we will continue on this downward path, even if the ECB president has not currently anticipated dates of subsequent cuts, suggesting that there will not be a definitive path to reducing the cost of money , due to the uncertainty of the international context.