The 12-month Euribor has managed to break all records: ended August with a monthly average of -0.359%, the lowest level in history.
Despite the fact that a new low was discounted, given the daily evolution during the last few days, the truth is that the current level is just a few thousandths below August 2019. At that time the mortgage indicator marked a milestone by standing at -0.356%, so variable mortgages referenced to the Euribor that will be reviewed soon will experience a testimonial reduction in the quota. For a medium loan, the savings will be just a few cents per month. However, we cannot forget that in May, in full confinement due to the coronavirus, the indicator reached the highest level since the end of 2016 and that at that time the possibility of an imminent collapse was not on the table.
Now, on the other hand, the market does not rule out further declines, since in the last days of August the indicator has moved below -0.36%, dragged down by the uncertainty that the re-emergence of covid-19 is causing in the market and the support measures announced by the European Central Bank (ECB) to boost the economy and inflation in the euro area.
Juan Villén, head of idealista / mortgages, argues that “current Euribor levels confirm that, after the brief mirage of rise a few months ago, the growth expectations of the European economy and inflation remain at minimum levels, which together with the immense debt accumulated by the governments , brings rates back to historical lows, with no forecast of any rebound in the coming months. This is certainly good news for families with a mortgage ”.
In that same line, Santiago Carbó, Director of Financial Studies at Funcas, explains that “the Euribor is at a minimum fundamentally because the ECB has redoubled its monetary facilities and the expectation is that monetary policy will remain highly accommodative for a long time. What happens to the indicator will depend on how long it takes to see an economic recovery and how accelerated it is. Before 2022 it is difficult to have significant increases, but if the recovery were to accelerate, they could arrive earlier. ”
In the case of Spain, the Government foresees a rebound of the economy of more than 10% in the third quarter, although the banking sector predicts a slow recovery, subject to how the pandemic evolves and what type of restriction measures can be put in place to stop new infections. From BBVA, for example, they estimate that this year domestic GDP will contract by around 11.5%, to grow by around 7% during 2021.
In the framework of the euro area, the pandemic has caused the largest quarterly contraction in history, although encouraging data such as the improvement in economic confidence in all countries in August, with the exception of Spain.
But if we take into account that the return to precovid-19 levels could be postponed until 2022, everything indicates that the Euribor will remain stable in negative territory at least until then. And this good news for mortgaged homes is, instead, a factor that adds more pressure to banks, whose business is hampered by low profitability and the foreseeable rebound in defaults as a result of the COVID-19 crisis.
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