The Euribor drops to 3.61% in January and makes mortgages with semiannual reviews cheaper, although those updated once a year still rise

The downward path undertaken by the Euribor in the final stretch of 2023 continues, although at a slower pace. With one day left until the end of the month, everything indicates that the reference index for the vast majority of variable rate mortgages in Spain will close January at around 3.61%, thus experiencing a slight drop compared to December. This decrease will translate into decreases in the monthly payments of mortgages that have a semiannual review with the January data. However, mortgage holders with loans that are updated only once a year will still have to wait to enjoy the first drops in their bills.

While waiting to know the data for the last day of January, the monthly Euribor currently stands at an average of 3.611%, its lowest mark since February 2023. If this figure remains unchanged, the index would record its third consecutive monthly decline at the start of 2024, after peaking at 4.16% in October.. However, the drop in January is expected to be much less pronounced than those recorded in previous months.

The Euribor fell from 4.022% in November to 3.679% in December, experiencing its largest monthly drop since 2009, of more than three tenths. However, the decrease in January does not reach one tenth, which confirms a slowdown in the rate of decline. “The market became overly optimistic at the end of 2023 and now adjusts its expectations to reality: there is no scheduled date to lower rates,” assesses Miquel Riera, HelpMyCash analyst.

In fact, despite the downward trend, the Euribor is still almost three tenths above the level registered a year ago. In January 2023, the index stood at an average of 3.337%, still immersed in an escalation that led it to exceed 4% in the second half of the year, between June and November, recording figures not seen since the outbreak of the housing bubble. This increase was driven by the consecutive increases in interest rates by the European Central Bank (ECB), undertaken with the objective of containing prices and returning inflation to the 2% goal.

The moderation of the Euribor in recent months has distanced the index from the 4% threshold crossed in June. That is, the index is already below the level recorded six months ago.. Therefore, variable mortgages that are reviewed semiannually with the January data will experience the first decreases in monthly payments, since in July the Euribor reached 1.149%. For example, the semiannual update of an average loan of 150,000 euros signed in January 2021 for 30 years and with a differential of 0.99% over the Euribor, will mean a reduction in the monthly bill of 47.71 euros, going from 787 .16 to 739.45 euros. In a mortgage of 300,000 euros with the same conditions, the savings will be 95.43 euros per month.

“We are already seeing decreases in the installments of variable mortgages with semi-annual review because, although they are the first to suffer the increase in the price of their installments if the Euribor is on the rise, with this downward indicator they are also the ones who see first how their installments decrease and, in addition, they experience more pronounced decreases”, explains the director of Mortgages at iAhorro, Simone Colombelli.

On the other hand, the relief has not yet reached mortgages with annual review, given that the Euribor is still higher than a year ago. In this way, whoever signs a mortgage loan of 150,000 euros at a variable rate in January 2021, with an annual review and with a differential of 0.99%, will see their monthly payment increase by 21.83 euros after the January update, which means 261.99 euros more per year until the next review. In the case of a mortgage of 300,000 euros with the same conditions, the increase would be 43.67 euros per month. Despite these being limited increases compared to the previous year's increases, mortgage holders have accumulated three consecutive years of increases.

“If nothing changes, the first reductions in mortgages that are reviewed annually would arrive from March-April. Now, the decline will not be motivated by a notable drop in the Euribor in the short term, but because the indicator would begin to be compared with the figures from the spring of 2023, when a very pronounced upward path began,” predicts Estefanía González, spokesperson from the mortgage comparator Kelisto.es.

“It is very likely that, if the Euribor continues with this downward trend, even if it decreases only a few hundredths each month, starting next March we will already see decreases in mortgage payments with annual review,” agrees Colombelli, who remember that the downward trend of the reference index for variable mortgages has arrived without the ECB having undertaken any rate reduction yet. “This leads us to think that, when the ECB begins to lower rates, the Euribor will fall even faster than it is doing now,” he adds.