The continued uncertainty in the global financial markets may be impacting on investor demand for commercial property by increasing funding costs and tightening credit conditions. In addition, commercial property tends to follow the economic cycle more closely than residential property, and near-term developments in the real economy could be particularly important for the performance of the commercial property market.
Most importantly, the interest rate on the three-year operations is indexed to the ECB’s main policy rate, i.e. the rate on the main refinancing operations. Thus, if ECB were to increase this rate, the costs for the remaining period of the three-year LTROs would also rise.