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Rates for loans and deposits rise, effects already felt by people and businesses

Last time updated
26.07.22
Rates for loans and deposits rise, effects already felt by people and businesses

The Luxembourg Central Bank has published data on the evolution of the country’s main lending and deposit rates. These rates apply for personal loans and deposits as well as ones for non-financial businesses all across the Eurozone.

The floating interest rate for home loans has increased by 4 base percentage points from July 2021 to May 2022. It is now sitting at a 1.36%. The fixed rate rose by as much as 72 basis points to a figure of 2.05%. Interest rates on loans for 10 years or more rose to 2.11%, adding 22 basis points. And consumer loans grew by 36 points to 2.89%.

Companies outside of the financial sector can borrow €1 million or less at 1.32% interest. Rates for them have also risen by 9 basis points. What if a company borrows more than a million euros? Then the rate will constitute 1.11%. It’s shown a strong rise by 20 basis points.

Loans are getting more expensive outside of Luxembourg too. On Thursday, July 21, the European Central Bank raised its key rates. It wasn’t a small raise: 50 percentage points at once.

There is no credit shock in the Grand Duchy and in Europe as of yet. But the growth in rates is noticeable. One of its side effects will be a decrease in the number of loans. Banks will need more economic guarantees from borrowers. Loan denials for individuals and even companies will become more frequent.

Nevertheless, both the Luxembourg and European central banks are confident that the crisis will be avoided. And the next rate hike this fall will be smaller. ECB officials are still worried that high rates will affect region’s future development.

We have previously reported more about the rate hike by the European Central Bank .

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Last time updated
26.07.22

Source: Luxtoday

Authors: Danila

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