He Euribor, the index to which most mortgages are referenced, continues to decline. Specifically, so far as of January 2021 the average of the indicator stands at -0.507%, compared to -0.497% at which it closed in December.
In the case of 3-month Euribor, the most followed by financial institutions to make their loans, it maintains its downward trend with -0.55%.
In other words, in both cases, the Euribor not only reached the level at which the European Central Bank (ECB) charges banks for having the money deposited in the institution, but it goes further.
The Euribor plummeted in 2020
The truth is that since May the Euribor took a downward path. The benchmark index for variable mortgages managed to chain up to five consecutive historical lows throughout the year to end up touching the barrier of -0.5%, deposit rate established by the European Central Bank (ECB). A moment that for many seemed like it would not come, but it did.
Simone Colombelli, director of Mortgages at iAhorro, has already announced that these rates are very likely to be reached.
The Euribor has fallen to double the levels with which the year began (January -0.25%).
“We can say that the Euribor has practically bottomed out and that from now on we will not witness any more plummeting falls as in recent months. We will see the index stabilize throughout 2021, but without leaving the negative terrain,” said the director of IAhorro mortgages.
In February, the Euribor will celebrate its fifth anniversary in negative.
The mortgaged winners of the Euribor falls
“2020 has been a difficult year for the real estate market, but an excellent one for the mortgage market and for the mortgaged. Those who have kept their job and the circumstances they had before the pandemic have enjoyed conditions that had not been seen in history ”, highlights Simone Colombelli.
This situation is especially beneficial for those who have been mortgaged longer, those who signed loans in the years of the mortgage boom, at the beginning of 2000, since they achieved relatively low spreads, which make them even tighter now.
Thus, it so happens that the average differential for those years was around 0.50% -0.70%, so they are about to pay no interest or these are testimonial.
This is not something new. During these years, banks came to offer spreads of 0.18% (Deutsche Bank) and savings banks of 0.25% for younger bank customers, who have not paid interest on their mortgage loans for years.
However, these falls in the Euribor have less and less impact on these bank customers for two reasons.
On the one hand, because when the falls are minimal, the impact is also minimal, although on average, the savings can be around 178 euros per year.
With the Euribor at -0.5%, a variable mortgage of 150,000 euros with Euribor + 0.99% at 30 years will be 14.89 euros cheaper per month. The monthly fee will go from 464.28 euros to 449.39 euros after reviewing it. In total, the savings will be 178.68 euros during 2021.
On the other hand, since they are mortgages with many years of life, the impact on interest is less, so the fall in the Euribor will be less noticeable in the installments.
What will happen in 2021 with the Euribor?
Everything points to what this year will not be very different from 2020 in the evolution of the indicator.
“We will see the Euribor enter a negative, but less aggressive stability. I would not speak of signs of recovery, at least, until the second half of the year. Most likely we will see the index for a long time, even years, without returning to positive terrain “, points out Colombelli.
In fact, the bank already predicts that it will remain negative until 2030 or 2031.
The policies of the ECB, the repayment of ICO loans and the entire economic context as a whole are some of the reasons that prevent the Euribor from taking another direction. The stimuli from Europe will continue until 2022, so it will be difficult for there to be a change in trend due to this variable.
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