Mortgage rates in Finland are falling as new US trade tariffs unsettle global markets and increase pressure on the European Central Bank to continue cutting interest rates.
Economists say US President Donald Trump’s decision to impose 20 percent tariffs on EU imports has weakened growth expectations and added to global economic uncertainty.
As a result, the European Central Bank is likely to maintain a looser monetary policy, which could further reduce consumer borrowing costs across the eurozone.
According to Nordea chief analyst Jan von Gerich, the longer the trade measures remain in place, the stronger the downward pressure on interest rates.
“Growth outlooks are weakening, and that supports lower rates. Inflation pressure is easing, so the ECB has more room to continue cutting,” von Gerich said.
Market expectations suggest that interest rates will stay on a downward trajectory for at least the next year. The 12-month Euribor, the most common reference rate for Finnish mortgages, has already dropped to 2.277 percent — its lowest level this year.
Juhana Brotherus, chief economist at the Federation of Finnish Enterprises, said the trade conflict has fuelled widespread fears of a recession.
“There is now a general fear of a downturn, not just in Europe and the United States, but globally. This has clearly pulled down rate expectations,” Brotherus said.
He noted that although falling interest rates may benefit mortgage-holders in the short term, the broader economic picture is less encouraging.
“Cheaper borrowing isn’t good news if it’s caused by a weaker economy. If Europe and Finland face worsening conditions, the lower rates won’t compensate,” Brotherus said.
Central banks are expected to continue adjusting their policies next week, with a 0.25 percentage point rate cut anticipated from the ECB. Analysts say the introduction of US tariffs has increased the likelihood that rate cuts will continue beyond what was previously expected.
Prior to the tariff announcement, speculation was growing that rate cuts had largely ended. Now the situation has changed.
“Before this shift, many thought we had reached the bottom of the interest rate cycle. Now it looks like there’s room for further cuts,” said von Gerich.
Patrizio Lainà, chief economist at STTK, said the effects may be visible to Finnish households sooner than expected.
“Uncertainty makes people and businesses more cautious. That lowers inflation and puts more pressure on central banks to cut rates,” Lainà told Iltalehti.
He said the 12-month Euribor could remain near 2 percent in the near future, and may even fall below that threshold.
“There is downward pressure in any case,” Lainà said.
Still, both Lainà and Brotherus warned that falling interest rates are no cause for celebration. If export-dependent industries suffer, the impact on employment could outweigh any savings on mortgages.
“If your job depends on exports to the US or global markets, fears about job security might be more important than interest rate movements. Slower economic growth also means slower wage growth, and that affects everyone,” Brotherus said.
Despite potential benefits for borrowers, Minister for Foreign Trade and Development Ville Tavio has warned of clear negative impacts on Finland’s economy. He is currently attending a meeting of EU trade ministers to discuss the bloc’s response to US tariff actions.
Tavio has said Finland supports trade liberalisation and believes in resolving disputes through negotiation. He also stated the EU would take “strong and proportionate” countermeasures where needed to protect European consumers and businesses.
As markets continue to react to trade instability, economists say the situation remains volatile. Uncertainty surrounding Trump’s trade policy is complicating forecasts, with both upswings and downturns possible depending on upcoming decisions.
“There’s no single predictable path right now,” von Gerich said. “We need to prepare for both better and worse developments.”
HT