The Twelve-Month Euribor Reaches Highest Average Rate Since 2008, Adding Pressure to Mortgage Holders

The twelve-month Euribor, the most widely used indicator in Spain to calculate variable-rate home purchase loans, already exceeded 4% in average rate in June, which adds more pressure to mortgage holders who will see how the Your credit installments become more expensive again by more than 300 euros per month.

According to interbank market data, with just one session to go until June closes, the indicator reaches an average monthly rate of 4.001%, the highest value since November 2008.

If this data is finally confirmed, the Euribor will be higher than that of May, when it stood at 3.862%.

This Thursday, the indicator has reached a daily rate of 4.103%, although last Friday it registered the highest data of the month, at 4.147%.

The Euribor continues to rise month after month in line with the roadmap being carried out by the European Central Bank (ECB) in its monetary policy. On June 15, the agency raised interest rates by another 25 basis points, up to 4%, a level it had not reached since 2008, and advanced an additional rise in July.

An increase that this same Tuesday was confirmed by the president of the ECB, Christine Lagarde, who also warned that it is too soon to see a brake on the rise in rates and reach the peak of increases. “It is unlikely that in the near future the central bank will be able to say with full confidence that the maximum rates have been reached,” she told the ECB’s annual forum in Sintra, Portugal.

As a consequence of the rise in the indicator, which will accumulate eighteen consecutive months of rises in June, variable mortgages will once again increase. This is because the current Euribor is much higher than a year ago, in June 2022, when the average rate was 0.852%.

As an example, for a mortgage of an average amount of 150,000 euros, with a term of 25 years and a Euribor plus 1% interest, the fee amounts to 877 euros per month. Compared to June 2022, this means an increase of more than 300 euros per month and 3,700 euros per year.

The Euribor will continue to rise, but without breaking records

Experts expect the Euribor to continue rising over the coming weeks, although they expect the rise to be less and less or to stabilize, without reaching the all-time high of 5.393% recorded in July 2008.

According to the XTB expert, Joaquín Robles, the upward path of the Euribor will be “increasingly limited”. “Despite the fact that the ECB intends to continue raising rates to curb inflation, rapid monetary tightening will continue to weaken the economic outlook and could condition future decisions,” he explains. In this way, he foresees that in August the indicator will move between 4.20% and 4.30%.

The Kelisto comparator includes the forecast of various organizations and entities and indicates that by the end of 2023 the indicator could be in a range of 3.44% and 4%. “Funcas and Asufin are the ones that forecast the highest figures for the end of the year, 4%, while Bankinter places the Euribor at 3.57% and Caixabank, at 3.44%,” he points out.

The director of iAhorro Mortgages, Simone Colombelli, sees it as “very possible” that the Euribor will hit a ceiling and that, in a few months, the first drops will take place. “In the first half of 2023, it has been stabilizing and has registered increases of between one and two tenths, as was usual before the war between Russia and Ukraine broke out. The Euribor stability stage has arrived,” he says.

From HelpMyCash they see a similar situation. For the coming months, the experts of this comparator point out that it is “more than likely” that the index will continue to rise given the intention of the ECB to raise rates again in July. Remember that the former president of the ECB, Mario Draghi, stated a few weeks ago that “we are heading towards a world of higher interest rates”, since inflation will not drop in the medium term due to a more than likely increase in public spending on defense and ecological transition and energetic. “It is evident that we have reached the end of rates at 0% and that the new normality could be a life with rates between 3% and 4%,” they analyze from this comparator.