THE ECONOMIC NEWS: European Central Bank interest rate cut

The recent interest rate cut by the European Central Bank (ECB) by 25 basis points will have a direct impact on the real estate market. It is the second drop in the price of money in the last eight years, after the one made in June. The move will reduce the cost of variable mortgages, allowing homeowners to pay less on their monthly payments and improve mortgage offerings. However, this reduction will also increase the demand for housing, especially in areas with low supply, which could lead to an increase in prices, especially in the new construction sector.

This move is designed to boost the economy by stimulating access to credit. As buyers get cheaper mortgages, many will feel incentivized to purchase property. However, the limited supply of homes in some areas may not be enough to meet this increased demand, leading to higher prices, a phenomenon that has already been observed in stressed housing markets.

Metropolitan areas such as Madrid and Barcelona, as well as popular coastal areas, could see a significant increase in house prices due to a shortage of new construction and sustained high demand. This highlights a structural problem in the real estate market: the lack of adequate supply to balance the growing demand.

In addition, the ECB plans further rate revisions in the coming months, which means that this trend could continue. Future decisions will depend on how key macroeconomic factors such as inflation, wages, and the overall economic situation in the eurozone evolve.

This drop in interest rates is a crucial tool for boosting credit and boosting the real estate sector, but it poses significant challenges in terms of housing accessibility, especially in areas where supply is not in line with growing demand.

Date of the next ECB meetings:

The Governing Council of the European Central Bank (ECB) meets approximately every six weeks on these dates and will announce its decisions on key interest rates:

• October 17, 2024
• December 12, 2024
• January 30, 2025
• March 6, 2025