The problems accumulate. Added to the concern about the economic and employment situation that is looming due to the coronavirus crisis is the slight rise in mortgage payments due to the 12-month Euribor rise.
And it is that the reference indicator for most mortgage loans in Spain April ended with a provisional monthly rate of -0.108%, compared to -0.266% in March. In addition to this strong monthly rebound, the current data is slightly above that registered in the fourth month of last year (-0.112%), so those who are going to have a review of the mortgage interest soon will find an increase in price of the fee.
Its about first rebound in mortgages since last June, although the impact on the pocket of the mortgaged will be testimonial.
The million dollar question is whether the 12-month Euribor will continue to rise or if it will resume its downward path. In the month of April, at least, it has experienced a very volatile evolution. Although it started the month with a daily rate of -0.168%, it reached a maximum on April 22 when it stood at -0.053%; but since then it has been falling day after day, down to -0.114%.
In principle, and with the looming economic recession, everything indicates that the European Central Bank (ECB) will maintain interest rates at the current historical lows of 0.0% (level in which they have been installed for four years, under the presidency of the Italian Mario Draghi), which should not cause large movements in the benchmark mortgage indicator. Especially if we take into account that, before the Covid-19 crisis broke out, the market already assumed that the Euribor would not return to positive territory at least until 2022.
How do you explain Juan Villén, head of idealista / mortgages, the rise in the Euribor is framed in the fact that, “in situations of great uncertainty like this one, banks become suspicious and do not know if the other bank to which they lend money (which underlies the Euribor index) is healthy or not. My opinion, I don’t think it’s more than a temporary upload, and we will surely see the Euribor at negative levels for quite some time. “
Among the investment community, the conviction is growing that the benchmark indicator for mortgages in Spain will be below 1% during the next five years. And, despite the fact that the limitation of the virus can have an impact on production and generate tensions on the supply side, everything indicates that demand will also decline due to the recession (lower employment and wages) and above all because with the very high level of debt of the states, there will be a lot of pressure for rates not to rise and stifle the economy.
Thus, Villén insists that “We are at a crossroads and we do not know where we will go, most discount a scenario of very low rates for a long time, and others think that in the medium term it will generate a lot of inflation, hence the rise in gold and interest for the house. For those who have a mortgage with a short term maturity, the variable rate will undoubtedly be a blessing, while those who mortgage long term, the opportunity of the current super low fixed rates can be a way to avoid future risks ” .
–
