what has changed for your mortgage

Christine Lagarde, President of the European Central Bank announced on Thursday 16 March a new increase in the key rates of the ECB. As a result, mortgage rates will also continue to climb. Explanations.

3.5% for the interest rates of the main refinancing operations, 3.75% for the marginal lending facility and 3% for the deposit facility. This Thursday, March 16, the European Central Bank (ECB) is staying the course and confirmed what the institution’s Board of Governors had already announced in February: a further increase of 0.5% on its rates.

In a February press release, the ECB reaffirmed its intention to raise interest rates significantly to ensure a return to the 2% inflation rate by the third quarter of 2025. To achieve this, the European Central Bank is counting on the following scheme: increase its interest rates, to curb recourse to credit while making savings more attractive.

A rise in rates passed on by the banks

Thus, the rate of the deposit facility, increased to 3%, represents the interest owed by the Banque de France to the French commercial banks which invest money there. The higher the rate of return on deposits, the more banks have an interest in putting money to sleep.

On the other side, the refinancing rate, now 3.5%, is used for ECB loans to banks. As this article from the World, a rate of 1% means that banks which borrow 100 euros from the ECB will have to repay it 101 euros. However, the higher this rate, the more the banks will then pass it on to the interest rates of the loans offered to their customers.

Real estate credit rates that will rise further

So, will this new rate hike have an impact on your mortgage? In the facts, borrowers have already been subject to the decision for several weeks put in place today by the European Central Bank.

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This increase was already expected, the banks knew that it was going to happen since February, because Christine Lagarde is only confirming what had been said in February. Banks are therefore still in an upward dynamic in terms of rates, confirms Mal Bernier, director of communication at Meilleurtaux. This is why the average real estate rate over 20 years is currently 3% and could reach 3.5% by summer.

Real estate credit: no further relaxation of the rules for borrowers

For Mal Bernier, questioned by MoneyVox before Christine Lagarde’s announcements, the important part of the speech was elsewhere: The most important thing tomorrow is the content of the remarks. Will the ECB announce this is the last big hike before it calms down, where is the speech going to stay super firm? In the second case, rates could continue to climb above 3.5% and head towards 4%.

Although the ECB struck hard with its new rate hike, it is more cautious about the continuation of the monetary tightening and has abandoned its commitment to raise rates further significantly in the coming months.

After the bankruptcy of Silicon Valley Bank (SVB) in the United States and the concerns around Credit Suisse which caused the stock market prices of European banks to falter, the ECB could have decided not to increase its rates as much as planned. But the banking sector is currently in a much stronger position than in 2008, assured Christine Lagarde, the boss of the ECB.

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