After a mad dash to stop inflation, interest rates could fall again and, within a year, mortgage payments, now a deterrent, could fall even further. The interest rate, currently set at 4.50% by the European Central Bank (ECB), could return to 3% in 2024 with three cuts of 50 basis points each, Deutsche Bank economists predict in a report reported by Bloomberg. Next year, the ECB may decide not to change interest rates, but rather reduce them to stimulate the economy. Moreover, given that inflation is now on track towards the 2% target, it is not a major concern.
The first half-point rate cut could come as early as March, followed by the second in June and finally the third in the second half of 2024. In this sense, confirmations come from some members of the ECB, such as the ‘hawk’ Isabel Schnabel. Who assessed that a new increase in interest rates is unlikely, without ruling out the possibility of a decrease in the cost of money in the first half of 2024? What will happen to mortgage loans?
Mortgage rate forecast for 2024
Telemutuo CEO Angelo Spiezia explains that the possibility of a decrease in the cost of money in 2024 will push the mortgage market to restart after the slowdown recorded in 2023. “The most likely expectation is that interest rates will remain stable at their current values in the next quarter and a new downward cycle will begin from March 2024. At such a sensitive stage of worldwide history, both at the economic and geopolitical level, it is very difficult to make medium-to-long-term forecasts for the markets.” “We must carefully consider it in real time: unforeseen future events can have both positive and negative impacts.”
Which mortgage should you choose, fixed rate or variable rate?
What is the most appropriate rate when faced with a possible scenario change? Today, the majority of borrowers are turning to fixed interest rates to protect themselves from the risk of further increase in installments following the increase in the cost of money in Europe. “If the trend in the cost of EU money reverses, it will always be possible to apply for the subrogation tool (free of charge for the borrower) that converts a fixed-rate loan into a variable-rate mortgage,” Telemutuo CEO said. “There is also the possibility of obtaining a mortgage with a renegotiable rate, which, as a matter of contract, offers the borrower the opportunity to review the terms of his loan at predetermined maturities of 5 or 10 years, depending on the offers of individual banks.”
In addition to the pure variable rate, there are also some alternative solutions available in the market that allow you to limit and manage increases in the cost of money despite having a variable rate; for example, fixed installment mortgage (the total term of the loan may vary), capped mortgage (maximum ceiling), hybrid mortgage or option. In this context, it is worth remembering that the government’s assistance to young people under 36 must be approved for the whole of next year, as foreseen in the 2024 budget, and the law on oncological forgetfulness was finally approved on December 5. This is long-awaited news for people who have had an oncological disease in the past and have hitherto faced many difficulties in obtaining a home loan, as well as participating in public competitions or adopting a child.
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Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
