CENTRAL European Bank (BCE) bosses have opted to keep interest rates at their current level until at least summer 2019, or longer if necessary, as part of their continued strategy to reach inflation objects and promote growth in the common currency area.
Lending to high-street banks by the BCE will attract interest at 0%, although the Eurozone governing body will continue to charge 0.4% for excess of reserves at one day, or marginal deposit facility.
It will continue with one-day lending rates, or marginal credit facilities, of 0.25%.
This conclusion was reached by the board of governors today (Thursday) at its meeting in the Latvian capital of Riga.
During the session, the BCE also decided to reduce debt-buying to a maximum of €15 billion per month and cease altogether after December.
This low interest policy also suggests the Euribor, or Eurozone consumer interest rate, will remain at rock bottom – having been below 1% for five-and-a-half years and dropping into minus figures for the first time ever in February 2016, the month of May closed this year on -0.188%.
A very slight rise is predicted for the end of this June, to -0.181%.
Spanish mortgages and some personal loans and credit cards are linked to the Euribor, and homeowners have been enjoying not only exceptionally low buying prices, but the cheapest mortgages in history.
Outside of major cities and sought-after beach locations, it is now possible to buy a medium-sized apartment with a mortgage of around €300 a month – albeit banks now require a minimum deposit of 20%, or 40% for a second or subsequent property, and taxes and fees in addition make up 12.5% of the purchase price.
Although experts have long warned Spanish mortgage payers that their financial honeymoon is not guaranteed forever, the risk remains low with rates having been relatively stable and gradually lowering for around seven years.
Also, unlike in the UK where variable-rate mortgages change from month to month, Spanish home loans are only reviewed once a year and adjusted in line with the current Euribor rate.
This means that by keeping a close eye on the Eurozone interest rate and staying abreast of any short-term predicted or actual changes, homeowners have months ahead of them to make a decision as to whether it would be safer to switch to a fixed-rate loan, and for how long.
