New housing loans issued in November 2024 experienced a drop of over 10%, reaching €519m, compared to €579m recorded in October 2024. This data, provided by 73 reporting banks in the grand duchy, was published by the Luxembourg Central Bank (BCL). Despite the decline from the previous month, November’s loan volume remains considerably higher than the €360m recorded in the same month a year ago.

The lower volume in 2023 was primarily attributed to high interest rates, which averaged 4.73% for an initial one-year fixation and 4.16% for a 10-year initial fixation. However, by November 2024, the European Central Bank had decreased key banking rates three times, by 25 basis points at each policy meeting, helping to push mortgage rates down to 4.22% for one-year fixations and 3.44% for 10-year fixations.

Additionally, the government a ‘tax credit’ and reduced registration fees for the last quarter of 2024 to stimulate the housing market. Despite these incentives, the momentum was insufficient to sustain loan growth, suggesting that potential homebuyers are waiting for further ECB rate reductions, expecting mortgage rates to decrease even further, rather than acting on the current rate reductions.

Outstanding mortgages

The total value of outstanding housing loans to Luxembourg households increased marginally, from €41.066bn in October 2024 to €41.119bn, indicating a slight growth in household borrowing despite the decline in new loan volumes and the ongoing adjustments in mortgage rates.

As prime minister (CSV) has the extension of temporary tax subsidies for housing until 1 July 2025, residential real estate transactions are expected to remain steady. However, if property prices rise in tandem, the market could face a slowdown, with the long-term effects yet to be seen.