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Before Christmas, loans are usually more expensive

In Luxembourg banks, consumer credit interest rates fluctuate according to certain patterns. What causes this?



In Luxembourg banks, consumer credit interest rates fluctuate according to certain patterns. What causes this?

The development of the Luxembourg banks’ interest rates over the last 20 years clearly shows that the banks have a fairly generous leeway in setting their interest rates. The interest rates on consumer loans experienced permanent extreme fluctuations during this period, but not necessarily in relation to the development in the key interest rates.

Credits are the cheapest in February

At first glance, the figures compiled month by month by the Central Bank of Luxembourg (BCL) seem to have a certain dynamism to them. On closer inspection, however, it is possible to identify a certain pattern. Thus, since the beginning of 2003, consumer credit rates have almost always been the lowest in February, while they were among the highest at the end or beginning of the year.

The household debt ratio stands at 176% of disposable income, making Luxembourg the worst performer in the EU in this area.

In June 2022, households taking out a mortgage had to bear interest rates, whether fixed or variable, higher than those recorded in 2021.

In March 2016, the European Central Bank (ECB) lowered the key interest rate to zero percent. And he stayed there until July this year. And yet, even during this period, interest rates fluctuated by as much as 1.5% each year, sometimes for as little as two months. How is it possible ?

Cheap money for car buyers

Asked about this, the banking association ABBL gives a possible answer. “We believe it is linked to the car festival taking place at this time,” said an ABBL spokesman. “Banks tend to lower their interest rates because the demand for credit to buy a vehicle is high,” he adds. And the Central Bank of Luxembourg gives the same explanation.

The BCL statistics show that not only are interest rates lowest in February, but that it is also the month when the amount of credit is by far the highest. Over the past ten years, this amount – for contracts with a fixed interest rate between one and five years – has amounted to approximately 80 million euros on average each February, while it was usually only 15 to 20 million in the weakest months of these years. .

At the end of the year, there was a slight increase in prices, which is explained more by technical than economic reasons.


While the car festival is indeed the main reason for the then low interest rates, it does not explain why the interest rate then rises again. Especially because it goes against the principle of supply and demand. And if banks offer relatively cheap credit when demand is particularly high, why do they become more expensive when demand falls?

Do the banks do their business at Christmas?

It is possible that the dependence is exactly the opposite: the number of credit contracts is so high in the months of February only because the interest rate is then at its lowest. After all, car purchases are among the highest recurring investments. And since there is basically no reasonable reason to buy a new car every three to four years, the banks help a little in connection with the car festival.

Luxemburg verfütt über viele Banken mit ingesellschaft around 230 branches.

The study by ABBL and CSSF shows that the majority of assets are still held in current and savings accounts and confirms the trend towards digitalisation.

The explanation given by BCL to explain why interest rates are generally the highest at the end of the year is in any case a bit poor: “At the end of the year we observe a small increase in interest rates, which ‘Explained more for technical than economic reasons, ‘ explained a spokesman for the central bank. “This is explained by the fact that at the end of the year in some banks customer accounts are debited on December 31 with credit card balances instead of at the beginning of the month,” he adds. And this then has consequences for the calculation of weighted interest.

The fact that interest rates on consumer loans are particularly high around Christmas therefore has nothing to do with the fact that consumption behavior and the willingness to make expensive purchases is also particularly high during this period, but is therefore primarily due to technical reasons.

Changes in key interest rates threaten the tradition

In any case, the next Autofestival will take place from 23 January to 4 February. If the trend remains true to the current statistics, interest rates will fall again. Don’t count on it this time though. Indeed, the European Central Bank has already raised its key rate three times this year, taking it from zero to 2%. And experts expect another increase of 0.75 percentage points to follow at the currency watchdogs’ next meeting on December 15.

Last February, the average interest rate (for one- to five-year fixed-rate contracts) on new consumer loans granted in Luxembourg was 1.54%. But at that time the key interest rate was still at 0 per cent.

According to BCL’s statistics, interest rates on loans have continued to rise ever since. In September, the last statistical value recorded so far was 3.46%. But the key interest rate has already increased by 0.75 percentage points, and that is precisely what can happen in mid-December. One thing is therefore certain: even if the banks do not deviate from their tradition in February next year, the interest rate will be very far from that which car buyers have been used to in recent years.

This article first appeared on

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