Wind BirchNordea’s Chief Economist, stated To YLE on Thursday, that the change, although more confident than expected, will only lead to a moderate increase in the Euribor interest rate. Finland’s most common mortgage reference rate Euribor 12 already priced in the expectation that interest rates will be raised by one percentage point in July-September.
“These expectations did not change too much today, although the increase itself was larger than expected,” he explained.
He predicted that the monetary authority will raise its interest rates by another 0.5 percentage points in 2023, but reminded that predicting the future is extremely difficult, as accelerating inflation creates pressure to raise interest rates at the same time as signs of an economic recession. do the opposite.
“China is doing worse than expected. Uncertainties brought by the war, the weakening of purchasing power can interrupt Europe’s economic growth and ease the situation,” Koivu said.
Nordea predicted in June that the 12-month euribor could rise to around 2.75% by mid-2023. However, Koivu pointed out that the forecast has since been revised downwards due to economic uncertainty, and he personally estimates that the interest rate will rise slightly above two percent by July 2023.
“[An increase of] one percentage point from today would be my estimate. I would say it goes above two percent rather than below it, he told the broadcaster.
According to him, the development will certainly have an impact on mortgages.
“Households should now prepare for all kinds of scenarios. I’ve been an economist for over 20 years, and I don’t remember ever seeing such great uncertainty,” Koivu said. “Everyone should now think about how much interest rate risk they are willing to take and whether it could be reduced with various types of protection. You should really think about things like this proactively.”
Lippo SuominenS Bank’s chief strategist, told According to Helsingin Sanomat, the ECB’s interest rate hike will lead to a “clear bump” in Euribor rates as early as Friday. Although the increase was largely priced in, its effects could be significant at the individual level.
“On Friday, the new interest rate will be approximately 1.2 percent plus [loan] margin. If your rate is reviewed and you’ve only paid, say, 0.6 percent margin for the past year or two, the bottom line is 1.8 percent. This means your interest has tripled,โ he emphasized.
He also reminded that interest rates have been exceptionally low for a long time.
“It has been said many times that interest rates at zero are not normal. It was fun while it lasted, but I hope not many people trusted it [continuing]โ, he commented, adding that borrowers need not fear that interest rates will rise to the level of the 1990s.
“Seeing interest rates of only three or four percent seems like a really far-fetched thought. But you should be prepared for the fact that they rise to around two percent,” Suominen said.
Aleksi Teivainen โ HT