Mortgage discussions can often feel overwhelming, particularly over the last few years, given the uncertainty in the market and the unpredictable shifts within the banking sector. However, 2024 brings a renewed sense of optimism for what’s to come.
Inflation figures across the Eurozone suggest that further increases to interest rates are unlikely in the near future and on 12th September 2024, the ECB announced a reduction in interest rates by 0.25 basis points, signalling a significant change. For years, the ECB has aimed to keep inflation at 2% across the Eurozone, and with inflation now stabilising, their revised stance is leading to a more favourable mortgage environment.
The Impact of COVID-19 on Inflation
The COVID-19 pandemic led to a surge in demand and a subsequent spike in inflation, particularly after 2021. However, as inflation has gradually decreased and stabilised in 2024, the ECB has reconsidered its approach to interest rates. A reduction to 4% on their main rate on the 12th of September 2024 represents the second reduction in 2024 and is very welcome news for current and prospective mortgage holders.
How does the changing interest rate environment affect mortgage holders?
Tracker Mortgage Holders
During the past 18 months of rate uncertainty, many tracker mortgage holders opted to switch to more secure fixed-rate products, favouring the predictability of fixed monthly payments. However, those who decided to stick with their tracker mortgages will likely feel reassured by the ECB rate cut announcement, which will directly benefit them. The average tracker mortgage holder will enjoy immediate savings and see a reduction in repayments by about €31 per month for every €100,000 owed on a 15-year tracker mortgage.
Fixed-Rate Mortgage Holders
If you secured a fixed mortgage in 2022, you might have enjoyed rates below 2%. Since then and 10 ECB rate increases, many fixed-rate mortgage holders have been concerned about the rates they will face once their term expires and how this will impact their monthly payments. While rates today may not be as low as sub-2%, they are trending downward, offering some relief.
Before deciding to re-fix your mortgage with your current lender, it’s always advisable to consult a trusted financial advisor. The switcher market is becoming more competitive, with cashback incentives widely available and discounted rates depending on factors such as loan-to-value (LTV), loan size, and the energy efficiency rating of the property. New lenders entering the market are also adding to this competitive environment.
Variable-Rate Mortgage Holders
Many mortgage holders chose to move away from relatively expensive standard variable rates as costs began to rise in 2022. While variable rates have been slower to respond to the ECB’s recent rate increases, this also means they may lag when it comes to decreases, unlike fixed rates.
Time to Review Your Mortgage Options
With these changes on the horizon, now is the perfect time for mortgage holders to reassess their financial options. At LHK Finance One, we can help you explore the best solutions for your situation, offering guidance to ensure your mortgage is aligned with your long term financial goals. As the mortgage market continues to evolve, now is the time to act.
Book a consultation with one of our trusted mortgage advisors here
Finance One now part of LHK Group