President of the European Central Bank Christine Lagarde signaled a reversal in interest rates after almost a year and a half, with the ECB’s governing council deciding to reduce key interest rates by 0.25%. The key question is who will benefit from this reduction.

Mortgage borrowers will not be affected by the initial rate cut, as they are protected until May 2025 under a decision by banks and the government to freeze mortgage rates at 2.7% (Euribor 1) and 2.85% (Euribor 3-month).

While interest rate cuts are irrelevant for mortgage holders, they are crucial for those with business loans. In 2024, many businesses, especially small ones, were struggling with increased borrowing costs, making debt servicing a nightmare.

For example, a business with a 150,000 euro loan over 10 years at a 3.5% spread was paying 1,483.29 euros monthly in July 2022 when the ECB rate was zero. After consecutive rate increases, the payment rose to 1,820 euros. With the first ECB rate cut, it decreased to 1,803 euros, giving business owners hope for further reductions.

Regarding credit cards and consumer loans, the latest data from the Bank of Greece shows the average interest rate for consumer loans without a fixed duration, including credit cards, open loans, and overdrafts, was 15.18%. Thus, the reduction in the key refinancing rate should start to impact these loans as well.