Holiday Rentals News - Mortgage hopes as euro interest rate cut to all time low

Mortgage hopes as euro interest rate cut to all time low

Mortgages could become more readily available in the eurozone. The European Central Bank (ECB) recently cut interest rates to an historic low, which property professionals hope will boost the housing market.

The ECB cut rates to 1.00 per cent, the lowest level since the euro was introduced in 1999, reports Overseas Property Professional (OPP). It is believed that a further cut of 0.25 per cent could take place later this year.

Charles Weston Baker from Savills' international team told OPP that the cut was good news for property investors. "Any cut in interest rates that's passed on to borrowers is positive, especially if it's part of a trend. People won't be encouraged if they see rates going up and down, but there's a general feeling that this is a trend and that we're in for a long ride."

Weston Baker added that he believed that mortgages with a higher loan to value (LTV) ratio would become easier to obtain as a result of the cut: "We believe that LTVs will return to 70-80 per cent within three to six months and the interest rate cut must help with that."

However, mortgage brokers warned that the effect of the cut is likely to be limited. Since European lenders tend to base the deals they offer on the Euribor, the rate at which European institutions lend to each other, an immediate effect is considered unlikely.

Clare Nessling from international broker Conti told OPP: "It's most common for European lenders to review their rates every three months so there won't be an immediate effect, even if there is another cut. The most it will do is support the daily fall in the Euribor rate."

Nevertheless, Nessling welcomed the decision overall: "But it's another positive sign for borrowers and will help reinforce the general feeling of growing confidence." The ECB also said that it would buy 60 billion euros worth of corporate debt in order to inject cash into the eurozone's economy. It is hoped that this will further improve the state of the property market.

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