Decision and comments favorable for those in debt in euros
October 1, 2019
In line with broad expectations, including ours, the European Central Bank decided today to leave interest rates in Euroland unchanged. The main rate – refinancing – will therefore still be 1.50%.
After the press conference accompanying the two-day ECB Council meeting, the market made sure in its opinion that in the coming months the cost of money in the eurozone is unlikely to change, and next year it will probably go down.
This is good information for all those who have mortgages in a single currency, because in the coming quarters the cost of their monthly service expressed in euros should gradually decrease in such conditions.
During the press conference
After the ECB Council meeting, its head warned against the growing threats to Euroland’s economic growth, presenting new lowered forecasts in this respect. According to the latest estimates of the Bank, the GDP growth rate in the euro area should be in the current year from 1.4% to 1.8%, and in the next year from 0.4% to 2.2%. This is clearly less than the ECB estimated in June, when it expected it to be 1.5% -2.3% and 0.6% -2.8%, respectively.
In turn, when referring to the issue of inflation, Jean-Claude Trichet emphasized that the probability of its increase in the following months has decreased and that inflationary risks are now balanced. This year inflation is expected to remain above the key level from the Bank’s point of view of 2%, but next year it is to be below it. According to the September ECB forecasts, the HICP ratio is expected to be between 2.5% and 2.7% this year and next 1.2% to 2.2%.
ECB decision and forecasts used for borrowers
The money market has been discounting this scenario for today’s events for some time. However, it is difficult for him not to do so, taking into account developments in Euroland, including primarily affecting the growth prospects of the eurozone economy and inflationary pressure in its area, issues related to the debt crisis.
Before today’s ECB decision, the 3-month Euribor rate set every day was 1.532%, it was at its lowest level since June 28 this year. and apparently below its highest level since March 2009, i.e. 1.615%, achieved on July 26 this year.
Keeping this rate is extremely important from the point of view of all those who are already paying back mortgages denominated in a common currency, or intend to take them soon. It is the basis for banks setting the interest rate on these liabilities, and its decrease translates into lower installments of our housing loans expressed in euros.
Euro housing loans in Poland
- The latest data from the Polish Financial Supervision Authority shows that at the end of July this year. the value of housing loans granted in the European currency was PLN 23.688 billion, and its share in the value of all housing loans granted was 7.90%.
- In turn, according to the Polish Bank Association (AMRON-SARFiN report), in Q2 this year. the share of the value of newly granted housing loans in the European currency in the value of all newly granted housing loans was equal to 14.1% and higher than in Q1 when it was 13.2%. As a reminder, in the years 2010 and 2009, in the period April-June it was respectively: 23.6% and 4.9%.