European mortgage rates dip below 4% as the ECB opts to wait-and-see

The European Central Bank (ECB) opted to hold its key interest rate at 4% on Thursday amid a brightening outlook for inflation. The decision likely paves the way for more, marginal cuts to mortgage rates.

The annual rate of inflation in the Eurozone fell to 2.4% in the year to November, the ECB said last month, far lower than analysts had expected only a few months ago. The improved outlook for inflation is weighing on borrowing costs across Europe, says John Busby, Head of Sales at Traverse International Finance.

That’s enabled lenders to price the typical 5-year fixed rate mortgages at a little under 4%. Variable interest rate mortgages from private banks are running at about 5.3%.

Despite recent easing, mortgage rates are now meaningfully higher than most borrowers are used to. That has weighed on property values, and prospective buyers have an opportunity to purchase well-priced assets in France. Whether to fix or take a tracker presents a tricky decision and will depend on an individual’s financial buffer and appetite for risk. That said, those seeking loans from retail banks will be limited to long term fixed rates for the time being as most French lenders are yet to offer variable rates.

We were encouraged to see more retail banks entering the mortgage lending market, and France’s Senate has also taken its first step towards relaxing the 90 out of every 180-day rule for British visitors following the UK’s departure from the European Union – both of which have set the scene for an active ski property market as the season gets started to heavy snow across the Alps.