The ECB cuts rates by 25 basis points


By John

The ECB has decided to cut interest rates by 25 basis points. The rate on main refinancing therefore drops from 4.50% to 4.25%, that on deposits from 4% to 3.75%, and that on marginal loans from 4.75% to 4.50%. The central bank announced this after the meeting of the Governing Council. It is the first cut after the cycle of increases that began in July 2022.

Fabi, the banks have already anticipated the rate cut

For some months, the banks, anticipating a rate cut by the Eurotower, have anticipated the decline and the decline could continue in the coming months. This was stated by the Fabi banking union, indicating that there are 6.8 million indebted families in Italy, equal to approximately 25% of the total: of these, 3 and a half million have a mortgage for the purchase of a house. «Mortgage rates have already fallen to an average of 3.69%, compared to average levels above 5% in 2023 and could fall further to 3.45% – claims Fabi – a reduction which will entail, in the case of a loan 25-year real estate worth 200,000 euros, a total saving of almost 62,000 euros (-17%). Consumer credit rates have fallen to an average of 8.93%, after peaks above 14%, and could fall further to 8.5%: it means that a 25,000 euro car bought entirely in installments, with a 10-year loan, it will cost almost 11,000 euros less (-22.2%) compared to 2023; while for a 750 euro washing machine, with a 5-year credit, the savings in the next few months will be 155 euros (-14%)”. Fabi explains that the overall value of mortgages for the purchase of homes amounted, at the end of March 2024, to 423.4 billion euros, up by approximately 33 billion compared to the end of 2020 (+9%), but down by 3 billion compared to the end of 2022 (-1%). Of the total of 423.4 billion disbursed, approximately one third, i.e. 144 billion, is at a variable rate and the remaining 279 billion is at a fixed rate. The installments of old fixed rate mortgages, i.e. those disbursed until the end of 2021-beginning of 2022, do not change and will remain intact until the end of the repayment plan; the installments of old variable rate mortgages could begin a progressive decline, even if it is difficult, at the moment, to indicate a precise trajectory, says Fabi.