Eurozone Inflation Expected to Continue Decline, Impacting Mortgage Rates
Gonzalo Bernardos forecasts a potential drop in the inflation rate to 1.5% by year’s end, influencing mortgage conditions in the region.
Inflation in the Eurozone is showing signs of moderation, with indications that this could lead to cheaper mortgage rates by the end of the year.
Economist Gonzalo Bernardos anticipates that the inflation rate will continue to decline, potentially reaching 1.5% by the year's end.
Recent data from the National Statistics Institute (INE) indicates that the Consumer Price Index (CPI) stood at 1.9% in May, down three-tenths from the previous month and marking the lowest level since October 2024. The core inflation rate, which excludes energy and fresh food prices, also fell to 2.1%, the lowest since December 2021.
Bernardos’ analysis, coupled with findings from a report by the Trioteca Study Center, suggests a combination of decreasing inflation, a historically low Euribor rate, and anticipated interest rate cuts by the European Central Bank (ECB), creating a more favorable scenario for borrowers in the upcoming months.
As of May, the Euribor, the primary benchmark for variable-rate mortgages in Europe, closed at 2.081%, marking its largest year-on-year drop in over a decade.
This significant decrease from 3.68% recorded a year prior translates to potential monthly savings for borrowers who refinance their mortgages, with reductions estimated between €130 and €260 per month, or €1,600 to €3,200 annually, depending on outstanding balances.
Bernardos, who serves as an advisor at the Trioteca Study Center, emphasizes that the current climate presents opportunities for renegotiating loan conditions.
Many individuals secured their mortgages in 2024 when interest rates exceeded 3%, and are now seeking to lower their rates to around 2%.
Notably, data from Trioteca for May indicates that 91.92% of the mortgages managed were fixed-rate, with an average nominal interest rate (TIN) of 2.27%.
While the average property value continues to rise—reaching €280,000 in May for an increase of 1.45% from April and 16.67% year-on-year—the average amount requested by Trioteca users remained stable at €191,000.
Second-hand homes remain the preferred choice, accounting for 96.77% of transactions, versus 3.23% for new builds.
Fixed-rate mortgages have dominated the market, yet mixed-rate options are beginning to gain traction, now representing 8.08% of new contracts.
These mixed mortgages have enabled some borrowers to save as much as €262 monthly, reflecting a growing interest in flexible mortgage options amidst a declining interest rate environment.
Bernardos also addressed the global impacts of trade policy, particularly since the beginning of Donald Trump's presidency in the United States.
He noted that while housing prices may rise due to tariffs imposed by Trump, these tariffs are expected to have a deflationary rather than inflationary impact within the Eurozone.
He suggested that any inflationary risks from EU retaliatory measures would be largely offset by significant drops in the prices of oil, natural gas, and numerous other raw materials.
In light of these forecasts, Bernardos posits that the ECB is likely to proceed with further interest rate cuts.
He conveyed in May through social media that the ECB will likely reduce its main reference interest rate in the upcoming meeting.
Should these projections hold true and inflation culminate at 1.5% by the end of 2025, relief for those with mortgages could extend over the following quarters.
Economist Gonzalo Bernardos anticipates that the inflation rate will continue to decline, potentially reaching 1.5% by the year's end.
Recent data from the National Statistics Institute (INE) indicates that the Consumer Price Index (CPI) stood at 1.9% in May, down three-tenths from the previous month and marking the lowest level since October 2024. The core inflation rate, which excludes energy and fresh food prices, also fell to 2.1%, the lowest since December 2021.
Bernardos’ analysis, coupled with findings from a report by the Trioteca Study Center, suggests a combination of decreasing inflation, a historically low Euribor rate, and anticipated interest rate cuts by the European Central Bank (ECB), creating a more favorable scenario for borrowers in the upcoming months.
As of May, the Euribor, the primary benchmark for variable-rate mortgages in Europe, closed at 2.081%, marking its largest year-on-year drop in over a decade.
This significant decrease from 3.68% recorded a year prior translates to potential monthly savings for borrowers who refinance their mortgages, with reductions estimated between €130 and €260 per month, or €1,600 to €3,200 annually, depending on outstanding balances.
Bernardos, who serves as an advisor at the Trioteca Study Center, emphasizes that the current climate presents opportunities for renegotiating loan conditions.
Many individuals secured their mortgages in 2024 when interest rates exceeded 3%, and are now seeking to lower their rates to around 2%.
Notably, data from Trioteca for May indicates that 91.92% of the mortgages managed were fixed-rate, with an average nominal interest rate (TIN) of 2.27%.
While the average property value continues to rise—reaching €280,000 in May for an increase of 1.45% from April and 16.67% year-on-year—the average amount requested by Trioteca users remained stable at €191,000.
Second-hand homes remain the preferred choice, accounting for 96.77% of transactions, versus 3.23% for new builds.
Fixed-rate mortgages have dominated the market, yet mixed-rate options are beginning to gain traction, now representing 8.08% of new contracts.
These mixed mortgages have enabled some borrowers to save as much as €262 monthly, reflecting a growing interest in flexible mortgage options amidst a declining interest rate environment.
Bernardos also addressed the global impacts of trade policy, particularly since the beginning of Donald Trump's presidency in the United States.
He noted that while housing prices may rise due to tariffs imposed by Trump, these tariffs are expected to have a deflationary rather than inflationary impact within the Eurozone.
He suggested that any inflationary risks from EU retaliatory measures would be largely offset by significant drops in the prices of oil, natural gas, and numerous other raw materials.
In light of these forecasts, Bernardos posits that the ECB is likely to proceed with further interest rate cuts.
He conveyed in May through social media that the ECB will likely reduce its main reference interest rate in the upcoming meeting.
Should these projections hold true and inflation culminate at 1.5% by the end of 2025, relief for those with mortgages could extend over the following quarters.
Translation:
Translated by AI
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