A drop in interest rates for mortgages could be on the horizon, the national statistics agency STATEC said in its latest estimate, offering some relief to borrowers.

Variable rates for new mortgages in Luxembourg have been steadily rising and currently stand at 4.7%, as reported by the central bank.

Meanwhile, the fixed rates for real estate loans are hovering around an average of 4%.

For consumer loans with a duration of less than five years, Luxembourg banks currently offer rates around 5.3%.

The question on everyone's mind is: When will the long-anticipated drop in interest rates occur?

Luxembourgers have been grappling with a sharp increase in rates implemented by central banks to combat inflation, particularly affecting those with variable credit.

In Statec's December economic report, a positive outlook is presented: "There is a consensus that key rates have reached a fairly restrictive level and that it would not be necessary to increase them further."

Statec suggests that the worst may be behind us, citing that inflation in Europe turned out to be "lower than expected." In November, price increases slowed to 2.4%.

The critical question now is when the interest rates will reverse their trend. Although central banks have not made a final decision, discussions are leaning towards a rate cut. In the United States, a majority of decision-makers anticipate a reduction of 0.5% in rates by 2024.

In Europe, the decline in inflation further supports the likelihood of a rate cut. Market analyses, as well as projections from Oxford Economics, are optimistic, estimating that the decline may commence in the spring of 2024.

On the less optimistic side, the IMF and the OECD foresee a potential rate cut towards the end of 2024 or even the beginning of 2025.