The inflation rate is below two percent for the first time in years. This increases the chances of interest rate cuts. The key interest rate cut by the European Central Bank (ECB) points in the right direction and gives the economy, but also prospective property buyers, more leeway again.
The ECB has lowered the three key interest rates by 25 basis points each. "The ECB has thus taken greater account of the economic concerns in the eurozone," says Heiner Herkenhoff, Managing Director of the German Bankers Association. The inflation rate in the eurozone, which has fallen to 1.7 percent, has created the necessary leeway for this.
The ECB expects inflation to pick up again in the coming months before falling to its target value over the course of next year. Domestic inflation remains high as wages continue to rise faster. The Bankers Association assumes that inflation rates of up to 2.5% are possible for the eurozone as a whole in November and December 2024.
Until recently, the market had only expected a key interest rate cut by the end of the year. Now the interest rate cuts have been somewhat faster than expected. This has given building interest rates a small boost downwards. A year ago, things looked very different. Back then, we had the extremely unusual situation that interest rates had risen very quickly and very sharply. In the meantime, interest rates have stabilized again and have been moving sideways with minor fluctuations for months. Property prices have also stabilized compared to autumn 2022.
Ifo President Clemens Fuest welcomes the ECB's interest rate cut. "In view of falling inflation and a weak economy, particularly in Germany but also in the eurozone as a whole, the ECB's reduction in the key interest rate is well justified".
Conclusion: The ECB's third key interest rate cut in a row means better prospects for private real estate buyers and real estate financing.
Photo / Graphic: © André Santana, Pixabay
