The Impact of Rising Euribor Rates on Variable Rate Mortgages

The people who have hired a variable rate mortgage They are subject to the fluctuations of an indicator, usually the twelve-month Euribor. Consequently, the economic situation has a full impact on the evolution of the installment to be paid in this type of mortgage loan.

Without going any further, the indicator has closed June at a monthly rate of 4,007%. This is a striking percentage, since similar levels had not been reached since 2008.

The Euribor closes June at 4.007%

The rise of the Euribor is part of the last rise of the European Central Bank (ECB)which raised interest rates by 25 basis points, that is, from 3.75% to 4%with the aim of tackling inflation.

Interest rates will continue to rise

In this context, there are many people who are returning a loan to a financial institution at a variable rate, who wonder how much their mortgage payment will rise in the coming months.

According to the forecasts of the financial comparator HelpMyCashthe installment of variable mortgages that are revised with the June Euribor «they will become significantly more expensive”.

«The truth is that the increase that the variable rate mortgages in June it follows the same pattern as in previous months”, he highlighted, later pointing out that it was to be expected that interest rates would rise again.

Thus, he has insisted that the increase in the fee that people who are repaying a variable mortgage will experience will be “similar to what they have been suffering, those who revised their fee in may or april«.

Far from reversing this trend, as it has warned, the euro area is heading towards a scenario of interest rates mid-term highsTherefore, the mortgage index could remain at high values ​​for several years.

Analysts believe that the era of 0% rates is over

“Looking ahead to the coming months, it is more than likely that the Euribor will continue to rise, given that the European Central Bank will raise its rates again in July,” predicted the comparator, which considers that “we could have entered a high rate period and stay like that for a long time.”

«It is evident that We have reached the end of 0% rates and that the new normality could be a life with rates between 3% and 4%”, he has made it very clear.

This will increase the mortgage payment

In this scenario, a person with a variable mortgage of 150.000 euros With a repayment term of 25 years and an interest of Euribor plus 1% that is reviewed every six months, the mortgage payment will be increased from 793 euros per month to 877 euroswhich translates into a monthly increase of 84 euros and semester of 502 euros.

However, in the case of a mortgage, with the same conditions, which is reviewed annually, the fee will increase from 625 euros per month to 877 euros. So you will pay 252 euros more each month, representing a total increase of about 3.022 euros for next year.