The state savings bank Spuerkeess a 0.50% reduction in its variable interest rates, particularly targeting mortgage loans, effective 1 July. This decision, based on market forecasts and diversified refinancing sources, aims to alleviate the financial burden on existing and prospective clients, said the bank in a recent press release.

Mortgage

The bank’s move reflects anticipated market trends. Claude Hirtzig, head of retail and professional banking at Spuerkeess, told Delano on 25 June 2024 that by considering various refinancing sources, Spuerkeess ensures it can maintain stability while offering “more favourable financing terms to our clients.” The reduction applies to both new and existing variable-rate mortgage loans, providing relief to all clients on variable loans. Residential mortgage loans account for more than half of Spuerkeess’s loan and credit portfolio.

Savings

In addition to mortgage loans, Spuerkeess will also reduce the rates on its savings products by 0.50%. This alignment ensures consistency across the bank’s financial offerings and maintains a balanced approach to interest rate management, stated the press release.

Preemptive reduction

Spuerkeess’ announcement exceeds the 0.25% cut in key euro area banking rates by the European Central Bank (ECB) on 6 June. This suggests that Spuerkeess anticipates further rate cuts from the ECB in the near future. According to the Luxembourg Central Bank (BCL), the for house purchases in the grand duchy was 4.84% in April 2024 for variable-rate loans with an initial fixation period of one year or less, compared to 4.13% a year ago.

It is also noteworthy to mention that in June 2024, the International Monetary Fund (IMF) has Luxembourg to implement income-based macroprudential measures for housing loans, such as limits on stressed debt-service-to-income ratios. Additionally, the IMF suggested that Luxembourg gradually reduce the maximum loan-to-value ratio to help minimise the risks of household defaults and credit losses.