ECB Rate Hike Hits Serbian Mortgage Payments

The European Central Bank (ECB) has raised its benchmark interest rate by 0.25 percentage points to 2.50%. This is the second increase this year, and it will have a significant impact on mortgage payments in Serbia.

A typical 100,000 euro mortgage payment could rise by about 50 euros per month due to the increased Euribor rate. Six-month Euribor climbed from around 2.1% in February to 2.88%, a jump of 70 basis points following the ECB's latest hike.

Nenad Gujanicic, chief broker at Momentum Securities, explained that the European Central Bank's decisions affect citizens in Serbia more than decisions made by their own central bank. The reason lies in the structure of Serbia's loan portfolio, where mortgages are mostly euro-indexed and carry a variable rate made up of a bank margin plus Euribor.

The market believes there's a strong likelihood the ECB will raise rates once more by 25 basis points before the end of the year. For Serbian borrowers with variable rate loans, that would mean yet another upward Euribor reset before the current tightening cycle comes to a stop.