Rates of the Central Bank of Luxembourg decreased

At the beginning of 2025, the Luxembourg Central Bank published fresh interest rate data that inspires cautious optimism for borrowers. This is especially true for mortgages and consumer loans, two key categories affecting the financial stability of households.

As of January, the variable mortgage rate had fallen to 3.88 per cent, while it was still above 4.04 per cent in December. This is the lowest rate since the spring of 2023, which could give homebuyers a welcome respite amid high property values.

However, fixed rates are showing a different trend: after falling at the end of 2024, the rate for loans over 10 years rose to 3.39 per cent in January. This suggests that long-term borrowers may face a new wave of rising borrowing costs if the trend continues.

Consumer loans also became cheaper: the rate fell from 4.82 per cent in December to 4.19 per cent in January. This is a positive signal for citizens, especially in the context of continuing inflationary pressures and rising cost of living.

Lower interest rates can stimulate demand for housing and commodities and improve the financial situation of households. However, rising fixed rates and high property values still remain constraints.

At the same time, such data is an indicator of a soft change in the credit policy of banks, which are beginning to adapt to new economic realities and market fluctuations.

For Luxembourg, where high housing prices have long been a systemic problem, any reduction in rates could be an important boost, especially for young families and first-time homebuyers.