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Credit and leasing: rates to keep an eye on

Published on 12.01.2023

By the end of last year, the average interest rate for a consumer loan of up to five years was 3.58%, and this rise in the cost of credit is putting households under threat.


At the time of the last Autofestival, it was still possible to take out a consumer loan with an annual interest rate of around 2%, but that was before inflation soared and the European Central Bank raised interest rates to counter the price hike.

According to the latest communication from the Luxembourg Central Bank, “the interest rate on consumer loans with an initial fixed-rate period of more than 1 year and up to 5 years increased by 12 basis points between September and October to 3.58% in October 2022”. Given the economic context, interest rates are expected to continue to rise this year. To what extent? It's hard to say, but no professional in the Luxembourg financial centre is willing to take the risk.

Leasing offers also affected

The rise in interest rates will also have financial repercussions on the rental fees associated with various leasing offers for both private individuals and companies alike. Although the term “rent” is typically used rather than “monthly payment”, the principle remains the same.

A financial institution, more often than not a bank, will advance the funds to acquire the vehicle and then replace those funds month by month from the vehicle's rental fee. Mechanically speaking, if interest rates rise, leasing rates will too, but the good news is that the VAT reduction of one percentage point that came into force on 1 January applies to the automotive sector as well.

The ACL is here to advise you and help you take care of yourself. Do not hesitate to contact us if you have any questions at acl@acl.lu or on +352 450045-1.

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