ECB Expected to Lower Interest Rates: Benefits for Mortgage Borrowers in Finland and the Euro Area’s Economy?

The European Central Bank (ECB) is expected to lower its key interest rates on Thursday, potentially providing relief for mortgage borrowers in Finland. Almost a third of households have a mortgage, and the most common reference rate is the 12-month Euribor, which has already been influenced by market expectations of the interest rate cut.

The ECB has raised its key interest rates by 4.50 percentage points after July 2022 but ended the hike cycle last October. Now, economists predict that the ECB will cut policy rates by 0.25 percentage points two to three times this year, with the 12-month Euribor rate expected to be around three percent by the end of the year.

The interest rate reduction could have positive psychological effects on households and companies, restoring confidence in the future. However, broader economic effects will require more interest rate cuts and clearer indications that Euribor rates are falling. The uncertainty regarding the ECB’s future steps and interest rate outlook remains high, particularly with regard to wage developments and inflation in the euro area.

Overall, while the specific effects of the ECB’s actions on mortgage borrowers will depend on their individual circumstances, there is potential for benefits for consumption, investment, and economic confidence as a whole.