Euribor has taken a break from the decline that began in November last year and rose again in February
The Euribor has temporarily stopped in its downward trend that began in November last year and rose again in February, averaging 3.67% for the month. However, the increase in this indicator, which affects practically all variable mortgages in Spain, is rather symbolic. It is only an increase of six hundredths, which will have little impact on monthly loan payments.
Variable rate mortgages that are only reviewed once a year and are based on the February Euribor will see a maximum increase in their payments of 1.4%. For a standard loan of 150,000 euros, repaid over 25 years with an interest rate difference of one point to Euribor, this means a monthly payment of 848 euros (an increase of only 11 euros). For a loan with the same conditions but over 300,000 euros, the increase would be 23 euros.
In contrast, families whose loan payments are reviewed every six months will benefit from a reduction in their monthly payments, which can be up to 4%. For a mortgage like the one mentioned above, this would mean a relief of around 35 euros per installment on a loan of 150,000 euros.
The reason for rising annual mortgages and falling semi-annual mortgages is simple: the Euribor, which was at 3.534% at this time a year ago, was lower than the current one. In August 2023, the same index was at 4.073%, which is higher than the 3.67% with which February ended.
The break in the Euribor downward trend is due to overly optimistic expectations regarding the first interest rate cuts. Money markets are speculating about when the European Central Bank (ECB) will start cutting interest rates, but it appears they are now expecting this to happen later. Why is that important? Ultimately, Euribor reflects the interest rate at which banks borrow money from each other, which in turn is determined by the interest rates that the ECB charges banks for lending.
However, commercial banks are not waiting for the ECB’s decision. You anticipate their moves and adjust the cost of the loans they grant accordingly. As a result, the Euribor has fallen faster than the ECB’s key interest rates, which have been between 4 and 4.5 percent since September last year – at historic highs.
That’s interesting too
2024-03-01 23:09:49
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