Money & WorkHow it works

How a decision in Frankfurt changes your loan payment.

The key rate is what banks pay to borrow from the ECB or earn parking money there. When it rises, money gets dearer for banks and they pass it on: variable-rate loans, overdrafts and new mortgages cost more within weeks, while savings rates rise more slowly. When it falls, the reverse happens. That's how the ECB steers the economy.

Useful: When rate hikes are announced, it pays to review any variable-rate debt.

Source: de.wikipedia.org

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