Recent estimates from the National Institute of Statistics and Economic Studies (STATEC) suggest that a decline in interest rates is on the horizon, bringing potential relief to mortgage holders in Luxembourg.

As residents grapple with the aftermath of central banks' efforts to counter inflation through a notable increase in interest rates, those with variable-rate mortgages are particularly feeling the strain.

The December economic report from STATEC offers a glimmer of hope, stating, "There is a consensus that key interest rates have reached a fairly restrictive level and that there is no need to raise them further." Currently, the variable rate for mortgages in Luxembourg stands at 4.67%, while the fixed rate is at 3.90%.

According to STATEC, the worst may be behind us, with inflation in Europe turning out to be "lower than expected." In November, the rate of price increases slowed to 2.4%, signalling positive prospects for consumers and borrowers alike.

The crucial question now revolves around when interest rates will start to decline. While central banks have not made a conclusive decision, discussions are trending towards a potential rate cut. In the United States, a majority of decision-makers are leaning towards a forecasted rate decrease of minus 0.5% in 2024.

In Europe, the trajectory of falling inflation further supports the possibility of a rate cut. Optimistic outlooks from the markets and Oxford Economics suggest that the decline could start in the spring of 2024. However, the less optimistic projections from the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) are leaning towards late 2024 or even early 2025.