The Beginning of a Decline: Euribor Shows Signs of Decreasing Mortgage Costs

The nightmare of the acceleration in the cost of mortgages It is still far from coming to an end although, after the conclusion of the first half of 2023, the light is beginning to be seen at the end of the tunnel. The behavior of the euribor so far this month it allows us to glimpse a slight decrease in relation to the average rate of the previous month, a circumstance that has not occurred for 20 months.

Specifically, December 2021 was the temporary scenario of the last decrease in the rate to which the variable part of most of the mortgage loans. At that time, the decrease registered in relation to the average of the previous month was 15 basis points, to settle at -0.502%.

meteoric rise

Since then, more than a year and a half of continuous and intense increases, which have raised the rate by a little more than 4.5 points; in fact, July closed with an average Euribor of 4.149%, which is the highest level in the last 15 years.

During the first days of the month of August, a downward trendunprecedented in the entire aforementioned period, which means that the average rate so far this month is around 4.05%.

A slight setback that, if confirmed in the coming weeks, will not have an excessively appreciable effect on the mortgage installments, but that, beyond a specific moment, represents a turning point that will mark the beginning of a decline in the Euribor that will lead, then yes, to a reduction in the cost of loans for the spring of 2024.

As of the first quarter of this year, a decrease in the rate of increase in quotas is already being registered, despite the fact that the Euribor has continued to rise, given that the calculation is made against the reference of 12 months ago.

hikes at a slower pace

If the trend of the first few days continues, those mortgaged that revise their installments with the August rate will suffer an increase in the variable part of 2.8 points, compared to the differential of 3.15 points that holders of this type of mortgage had to face. loans in July.

The bulk of the increases were concentrated between July and November 2022, when the Euribor climbed close to 2.9 points in just five months; the rate then reproduced the first increases in the official price of money in the eurozone by the European Central Bank (ECB)whose most intense revisions in search of trying to stop the escalation of inflation occurred in those months.

In the same way, the downward trend that the market is reflecting in this month of August, for the first time in just over a year and a half, is due to the effect that it is discounted that the issuing body will carry out a rate hike more than 25 basis points (which will leave the average rate at 3.75%), given that the moderation of the rise in prices is increasingly evident.

In addition, the ghost of the recession has begun to appear in some of the main economies of the Old Continent, due to the effect of cooling caused by the abrupt turn in the monetary politics from the eurozone; an element that, under the consideration of the experts, will also be taken into account by the ECB’s governing council when it comes to putting an end to rate hikes and moving to a phase of observation.

The bank, waiting

For their part, financial institutions are also predicting a change of course in the behavior of the mortgage market. In the different presentations of the results corresponding to the first six months of the year, the executives of the bank They estimated that the notable increases in the interest margin that have served as the basis for registering the highest profits in more than a decade would come to an end in the third quarter of 2023, given that the interest rate curve begins to mark a progressive decline.

The progressive repricing of loans is coming to an end to move on to a stabilization phase, which is expected to be the most likely scenario for the next two years.

contained arrears

For the moment, this period is being surpassed by the sector with hardly any increases in the ratios of delinquencywhich has been a pleasant surprise for the entities, which had even reinforced their provisions with a view to a foreseeable rebound.

At this point, the executives have attributed this trend to the behavior of the Spanish economy, which has exceeded expectations, especially with regard to the working marketkey to avoid greater evils in a scenario of abrupt rise in costs such as the one that has occurred.