A handful of expert economists thought last month that the ECB rate tendency to diminish will persist over the coming months. The horizon seemed then brighter as it would be profitable to take on a variable rate mortgage.

On the 1st December 2011, then newly nominated president of the European central bank Mario Draghi had made clear that he was ready to take additional measures to support the Eurozone economy. Effectively, on the 8th December 2011, the European central bank announced a decrease of its base rate after the European Central Bank, on the 3rd November 2011, previously, cut interest rates by a quarter of point to 1.25 % in a surprise move for most economists.

The ECB has cut interest rates by a quarter of point from 1.25% to 1.00%, reaching the lowest rate ever for the second time in the history of the central bank. Additional measures to assist banks are also expected to be announced in order to facilitate bank’s access to funding. Consequently Euribor rates decrease is anticipated

By implementing these measures, the ECB hopes to distance the recession and the deflation in the Euro zone and therefore support economic growth. Moreover, it could impinge on the cost of funding for banks in the Eurozone which will consequently affect interest rates for loans and mortgages. Consumer mortgages are indexed on Euribor rates that directly reflect the base rate in the Euro zone.

In short lower ECB interest rate means lower mortgages rates.

Because of the rate cut, we should notice lower bank rates, in particular for variable rates since they are tracking base rates. Subsequently it is the right time for taking on a French mortgage.

“In December and January, if the new downward trend of French Treasury bonds persists, French banks will then be in a position to offer slightly better interest rates and will try to take advantage of the coming key winter months to gain new customers” says Sebastien Bessadi, our mortgage broker.

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Tags: French banks, French Mortgage, rate mortgage