The Governing Council of the European Central Bank (ECB) decided to reduce the three reference interest rates for the cost of money in the euro zone by 25 basis points. Therefore, the interest rates applicable to main refinancing operations, marginal lending facilities and deposit facilities will be reduced to 4.25%, 4.50% and 3.75%, respectively, with effect from June 12, 2024.
The first 25 basis point cut in rates by the European Central Bank comes “after 10 consecutive increases, to which “at subsequent meetings in late 2023 and early 2024 the ECB kept rates unchanged”. the cost of money” therefore falls to 4.25%. The report by the Autonomous Federation of Italian Banks (Fabi), which recalls that “the impact on mortgages, in recent months, has been very significant”. monetary policy there will be “more significant advantages for families, both when purchasing a house and when purchasing cars or household appliances”. , anticipated the expected reduction in rates and the fall could continue in the coming months”.
“Mortgage rates have already fallen to an average of 3.69%, compared to average levels above 5% in 2023” and according to Fabi “they could fall even further to 3.45%: a reduction that will imply, in the case of a 25-year real estate loan of 200 thousand euros, a total savings of almost 62 thousand euros (-17%)”. With regard to consumer credit, in recent months “consumer credit rates have fallen to an average of 8.93%, after peaks above 14%, and could fall further to 8.5%”. For Fabi “it means that a car worth 25 thousand euros bought entirely in installments, with a 10-year loan, will cost almost 11 thousand euros less (-22.2%) compared to 2023; while for a washing machine worth 750 euros, with 5 years of loan, credit, the savings in the coming months will be 155 euros (-14%).” “At the end of 2021 the average interest rate was 8.1 %, in light of the decision of September 14, when the cost of money reached 4.5%, it reached 14.55%. Throughout 2023 the average fell to 8.93% and could soon fall to 8.5%.” The autonomous banking union then gives two examples: “To buy a 25 thousand car in full installments, with a 10-year loan, the total cost went from 37,426 euros at the end of 2021 to 48,961 euros at the end of 2023, while now it could fall to 38,101 euros, with an overall saving of 10,859 euros (-22.2%) compared to the rates at the end of 2023” The second is for the purchase of «a washing machine worth 750 euros in full installments, with a 5-year loan». down to 951 euros with an overall saving of 155 euros (-14%) compared to the rates at the end of 2023”.
Source: IL Tempo
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.
