- The European Central Bank raised interest rates after almost three years.
- The ECB may raise interest rates two more times this year.
- Average market mortgage rates should gradually approach 4%.
- Poor state management increases bank funding costs and mortgage rates.
The European Central Bank (ECB), which on Thursday raised its interest rates for the first time in almost three years, may do so again this year, perhaps twice. He stated this in his comment macroeconomic analyst of Slovenská sporiteľna Marián Kočiš, which considers the further development of the war in the Middle East and the economic situation to be decisive factors.
According to the analyst, the ECB reacts to the inflation outlook in the medium term, and its rates are primarily influenced by the rates for shorter bonds. “Financial markets already partially incorporated risks and expectations into prices immediately after the start of the war at the beginning of March. We see on the market that the price of money in the three-year horizon, measured by three-year interest rate swaps, remains approximately 55 to 60 basis points higher than before the war. The market is already gradually reflecting these increases into the prices of loans and deposits.” zoomed in on Kočiš.
According to him, this effect will also be manifested in mortgages until the situation in the Middle East de-escalates.. “From the average level of 3.36% that the market reached in March and 3.46% in April, the average level of market rates will move further towards 4%,” he concluded.
Eva Šablová, director of loans at FinGO.sk, also expects a gradual and moderate increase in mortgage rates. According to her, the decision of Slovak banks to adjust rates is influenced not only by ECB policy, but also by the state of domestic public finances. “Bad management of the state is directly reflected in higher costs for financing the banking sector,” she said in her comment. However, according to her, it is difficult to predict where the rates will be in a year or two, which is why shorter mortgage fixations currently prevail.
