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The European financial environment has just experienced the main turning point with the decision of the European Central Bank (ECB) to reduce key rates by 0.25 percentage points. Measures that are not unnoticed in context, when access to a mortgage loan remains a capital problem for households and investors. This decline could stimulate demand and redraw the dynamics of the market, but observers remain shared to their actual extent.
Cash release with immediate consequences
On 6 March 2025, the European Central Bank announced a new decline in its three main rates to support inflation and growth support. Indeed, Christine Lagarde, the president of the institution, emphasizes that this decision is “making new loans to cheaper businesses and households” and “to soften monetary policy, which has become too restrictive given the current market dynamics”.
Specifically, it should be noted that:
- The level of main refinance operations was reduced to 2.65 %;
- The ease of deposit drops to 2.50 %;
- Easy march loan at 2.90 %.
Such a decision has a direct impact on real estate credits that are closely associated with the ECB monetary policy. Banking facilities that can now borrow at reduced costs are starting to modify their offers. The simulation shows that a debtor who benefits from a 3 % rate instead of 3.8 % for a loan of EUR 350,000 could save more than EUR 33,000 for the entire duration of the loan. However, this adjustment is not immediately transferred to a uniform decline in rates practiced by banks, as the latter also includes other criteria, such as the risk of defects and the economic market.
Towards the sustainable recovery of the market or temporary stabilization?
If it is good for debtors that the decrease in guide rates is guaranteed by automatic recovery in the real estate market. Several major financial institutions, such as Goldman Sachs, Nomura and Barclays, believe that the ECB can continue this trajectory with two other drops in 2025, which would further emphasize accessibility to the loan. Some observers ensure stabilization of real estate rates around 2.6-2.8 % by the end of the year, a favorable perspective for those who are considering a medium-term purchase of real estate.
However, the factors of caution remain. The macroeconomic environment remains marked by geopolitical uncertainties, increased commercial barriers and slowing growth in several countries in the euro area. In addition, although rates are more attractive, banks still demand profile lending that support the strongest files. This situation could therefore maintain a market segmentation where only candidates who have good payment capacity will benefit from the most advantageous conditions.
Although this decline in rates appears to be a window for investors in real estate, it will not solve the structural tension of the market. The demand should gradually return, but without softening the criteria for granting and permanent stabilization of the economy, the promising effect of the lever could be limited.
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A graduate of the Toulouse and the Blockchain Consultant Certification certification holder and I joined the adventure of Cointribuna in 2019. I convinced of the potential of blockchain to transform many economy sectors, committing to raising awareness and informing the general public about how the ecosysty developed. My goal is to allow everyone to better understand blockchain and take the opportunity they offer. I try to provide an objective analysis of messages every day, decrypt trends on the market, hand over the latest technological innovations and introduce the economic and social issues of this revolution.
Renunciation
The words and opinions expressed in this article are involved only by their author and should not be considered investment counseling. Do your own research before any investment decision.