How much the ECB’s lower interest rate reduces them

It is the first consecutive cuts since December 2011. With the prime rate falling to 3.25%, the implications are significant for borrowers who will see their loan payments fall further. The profit reaches up to 735.24 euros per year for an average mortgage or up to 72.84 euros for an average consumer. Big beneficiaries and those in business, who see the entire interest rate reductions pass through to their monthly installments.

Mortgages

The biggest reductions in loan installments are seen in those with longer term loans and larger borrowing amounts. Obviously for households this is the mortgage category, where interest rates have fallen from 6.33% in June, before the ECB’s first reduction, to 5.37% now. The difference is greater than the Central Bank’s interest rate cuts, and to a large extent this is due to bank competition and their aim to “warm up” housing credit again.

In practice, this means that an average mortgage loan, for Greek banking data, of 100,000 euros, with repayment in 30 years, will now have an installment of 559.66 euros and the profit for the borrower will reach 61.27 euros per month or 735.24 euros per year. The longer the repayment period, the higher the interest cost, so if the same loan had repayment in 40 years, the profit would be higher. The installment would drop from €573.39 per month to €506.95 and the benefit would be €66.44 per month or €797.28 per year. And for those thinking of getting a mortgage with a “locked” fixed rate for the entire term of the loan, there is again a benefit, but a smaller one. For a loan of 90,000 euros the installment has been reduced from 589.99 euros before June, to 565.51 euros in October and the benefit reaches 24.48 euros per month or 293.76 euros per year.

Calculation of mortgage installments

Loan	June 2024		October 2024		Profit (€)
	Interest rate	Dose	Interest rate	Dose
100,000 euros, repayment 30 years, variable	6,33%	620,93€	5,37%	559,66€	61,27
150,000 euros, repayment 30 years, variable	5,98%	908,99€	5,37%	839,49€	69,5
90,000 euros, repayment 20 years, fixed interest rate	4,8%	589,99€	4,42%	565,51€	24,48

Source: Bank websites

Calculation of installments of consumer loans

Loan	Payback	June 2024		October 2024		Profit (€)
		Interest rate	Dose	Interest rate	Dose
2,000 euros	12 months	14,75%	180,28€	12,86%	178,50 €	1,78
5,000 euros	24 months	14,75%	241,84€	12,86%	237,38 €	4.46
10,000 euro purchase car	60 months	14,30%	234,24 €	12,53%	228,17€	6.07

Source: Bank websites

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