Luxembourg: lower mortgage rates give hope for housing market recovery

Against the backdrop of a prolonged downturn in the Luxembourg property market, mortgage rates are showing a steady decline - and this could be a turning point. According to the latest figures from the Central Bank of Luxembourg (BCL), the variable mortgage rate fell to 3.84 per cent in February 2025 - down from 3.88 per cent a month earlier. Fixed rates have also become more affordable, falling from 3.39 per cent to 3.31 per cent.

This is not the first wave of declines since the beginning of the year, and the trend covers not only mortgages but also consumer loans: on these, rates have fallen from 4.82 per cent to 4 per cent since December 2024.

After years of soaring house prices, tighter lending conditions and a slowdown in transactions in the market, even small shifts in interest rates can bring confidence back to buyers. Lower interest rates increase the availability of credit and potentially reduce monthly repayments, which is especially important in a country with one of the highest house prices in the EU.

Previously, many potential buyers preferred to postpone property purchases, waiting either for prices to fall or for credit conditions to improve. Now that rates have started to decline steadily, some of the pent-up demand may return to the market.