Euribor Continues to Climb: May Reference Set to Close at 4%, Highest Since 2008

The Euribor grows more slowly, but has not stopped its climb. And the reference of this 12-month indicator, important because it is the one that determines the price of most variable mortgages in Spain, will close in May at around 4%, the never seen since November 2008. With one day to go before closing month, which can cause a variation of a few hundredths, the average stands at 3.859%, when in May 2022 it marked 0.287%. This difference of more than three and a half points is relevant because it determines how much more expensive the loans that use the May indicator to calculate the bills will become.

For an average mortgage (145,510 euros to be paid in 24 years, according to INE data referring to 2022), with a differential of Euribor plus one point and discounting the capital amortized in the last year, this growth will mean paying 252.5 euros more per month. That is to say, 3,030 euros of extra cost per year (normally, the letters are recalculated every 12 months, although it depends on each contract and there are also those that do it every six). Specifically, it would mean that compared to a fee of less than 588 euros per month a year ago, now it would go to 840 euros.

This is a large increase, although it is the second consecutive month that mortgages have become less expensive than in the previous month. In fact, the 43% increase is the lowest of the entire year, since the letters rose around 49% in January and February, more than 50% in March and 46% in April. The reason is twofold: on the one hand, as the Euribor has not stopped growing since January 2021, the year-on-year comparison is now made against months in which the indicator was already rising strongly; on the other, the rise of the Euribor itself has slowed down a lot in recent times and, although there is still an upward path to the top, it seems to be close.

For Raymond Torres, director of the Economic Situation of Funcas, it is “logical” that the Euribor now moves much slower than a year ago. “The logical thing is that it is attached to the intervention rates of the European Central Bank and it takes off when the markets anticipate a rise in those rates,” explains the economist from the study center of the old savings banks. “Since it is now considered that the ECB is going to increase a little, the Euribor practically does not move,” he adds.

In fact, in May there is barely a difference between the 3.86% average of the Euribor and the 3.75% for the main financing operations that the eurozone banking regulator set at the beginning of the month. And the same if you look at the 3.25% deposit facility, the rate that many experts point to as a reference for banks in times of market decline.

However, this interpretation means that, almost inevitably, the Euribor will continue to rise because nobody expects the ECB to cut the restrictive monetary policy anymore. In fact, analysts expect at least one or two more rate hikes, depending on how inflation advances, the resilience of the European economy and the evolution of the financial crisis that caused the fall of Silicon Valley Bank in the United States. Joined. Torres believes that there is “a small additional route uphill as a result of these three factors”.

Another thing is, when rates top out, how long will they stay at that level until they come back down. “What we foresee is that there will be a kind of plateau that nobody knows how long it will last,” summarizes the president of Asufin, Patricia Suárez. In the association for the defense of financial users, they remember that, in addition to the price of variable mortgages, consumers must be aware of other issues when signing a loan. The most basic advice for Suárez is to look at “the supposed bonuses for contracting other products”, because “the supposed lowering of the mortgage is often not such.” Also to the subrogation commissions of the loan or for early repayment, at a time when many borrowers can pay off changing their mortgage bank or reducing the principal or the term of the contract.

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