Euribor Climbs Above New Threshold in One Year’s Time

In Finland, the most popular reference interest rate for mortgages, namely the 12-month euribor, achieved a record high for the year, surpassing the 3.7 percent threshold. The interest rate was quoted at 3.738 percent on Friday.

The market has been in anticipation for a decrease in interest rates for a long duration. The current expectations have now stabilized. The market predicts the 12-month Euribor to be nearly 2.9 percent a year from now, whereas a few days ago the prediction was 2.7 percent. As recent as the end of December, the market anticipated the 12-month Euribor to decrease to approximately 2.2 percent by the end of this year.

Nordea’s chief analyst Jan von Gerich stated on Friday via message service X that the reference interest rate will persist in increasing when “interest rate cut expectations in the market further extend into the future”.

He projects that the European Central Bank will initiate lowering its central interest rate at the onset of summer.

“A decrease in June remains a reasonable prediction,” he writes.

Since the turn of the year, the target of interest rate cut expectations has shifted. Earlier, financial experts generally predicted that the ECB could initiate lowering interest rates as early as spring.

In December, the market was taken aback when the ECB did not issue a preliminary warning about prospective interest rate cuts.

“We didn’t deliberate on interest rate cuts at all,” said the ECB’s French president Christine Lagarde at the time during a press conference. The ECB continues to be apprehensive about the acceleration of inflation.

The annual euribor impacts the disposable income of numerous households in Finland via loan servicing costs. With this, the mortgage interest rate is examined once a year on a preset date.

The level of interest rate and its predictability significantly influence the housing market, which has been relatively stagnant in recent months due to escalating interest costs.