Modest rise in home loans in April driven by attractive rates

With mortgage rates at their lowest level since March 2023, April saw a moderate increase in home loan volumes in Luxembourg — a sign of continued buyer interest, particularly from young families, despite evolving fiscal and monetary conditions.

A Stable Market Supported by Favorable Financing

According to the latest data from the Central Bank of Luxembourg (BCL), new home loans totaled €539 million in April 2025, a 1.9% increase from March. Earlier in the year, volumes were lower: €446 million in January and €472 million in February — indicating a relatively stable housing market.

Two main factors are contributing to this momentum:

• A steady decline in interest rates driven by eight consecutive cuts by the European Central Bank (ECB) since June 2024.
• A temporary tax credit introduced by the Luxembourg government to support homebuyers, which remains valid until June 30, 2025.

Historically Low Rates — But for How Long?

Fixed rates for one-year loans are currently around 3.5%, the lowest level since March 2023. Long-term fixed rates (over 10 years) are hovering at 3.45%, suggesting that banks expect only modest further rate cuts — likely one final reduction of 25 basis points this year.

Who's Borrowing?

The majority of new mortgages are in the 25 to 35-year range, indicating that young households and first-time buyers make up a large share of current loan activity.

While confidence appears to be returning, the trend remains fragile: with tax incentives set to end and price increases potentially on the horizon, buyer demand could cool. Sellers — especially developers — should be cautious and avoid overly aggressive pricing, which could deter interest.

Key Takeaways

• 📉 Mortgage rates at a two-year low
• 📊 +1.9% in new home loans in April (vs. March)
• 🧾 Tax incentive ends June 30, 2025
• 🏡 Most loans span 25–35 years
• ⚠️ Only one further rate cut expected

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