Interest Rates Expected to Rise Further, Putting Pressure on Affordability
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Based on current trends, it appears that interest rates have not yet reached their peak
In the coming months, we expect more increases in interest rates, which could put further pressure on affordability. The 12-month Euribor benchmark interest rate, which guides mortgage rates, is expected to rise further, although interest rates are believed to be close to their peak. The European Central Bank (ECB) has already hinted at a 25 basis point rate hike at its upcoming meeting in July. Recent hawkish statements by some ECB members seem to indicate that one or more rate hikes will follow after the summer. This will put additional upward pressure on the Euribor. On top of that, mortgage rates have yet to catch up after the rapid rise in Euribor.
Based on current trends, mortgage rates will continue to rise in the coming months. We expect the average variable rate (with a fixed-rate period of up to five years) for mortgages to potentially peak at 5% in the second half of this year. This projection reflects a significant increase from the rate of 3.9% recorded in April 2023.
The upside potential for fixed interest rates is even bigger. Currently, there is an atypical scenario where floating rates are higher than fixed rates. This suggests that fixed interest rates have even more room to rise and again exceed floating rates.
Evolution of interest rates on mortgage loans and Euribor 12M
