The Euribor has taken a break from the decline that began in November of last year and rose again in February to stand at 3.67% on average for the month. Of course, the rise in the indicator with which practically all variable rate mortgages in Spain are reviewed is rather symbolic.. This is an increase of just six hundredths that will barely have an impact on the monthly payment of the loans.
Variable mortgages that only have an annual review and must do so with the February Euribor will suffer a maximum fee increase of 1.4%. This increase, applied to a typical loan of 150,000 euros to be paid in 25 years with a differential over the Euribor of one point, would imply a fee of 848 euros per month (just 11 euros increase). In the case of a loan with the same characteristics, but of 300,000 euros, we would be talking about 23 euros more.
On the other hand, families who review their loan payment every six months will benefit from reductions in their monthly payment that can reach 4%.. For a mortgage like the one mentioned above, the payment relief would be around 35 euros in the case of loans of 150,000 euros.
The reason why mortgages that are updated once a year will go up and semi-annual ones will go down is as simple as the fact that the Euribor that was recorded at this time last year (3.534%) was lower than the current one.. While the same index in August 2023 (4.073%) was higher than the 3.67% at which February closed.
The interruption in the decline of the Euribor is due to overly optimistic expectations regarding the first cuts in official interest rates. Money markets were betting that the European Central Bank (ECB) would start lowering rates earlier, but it seems that they are now beginning to assume that this moment will come later. Why is this important? In the end, the Euribor reflects the interest rate at which banks lend to each other, which in turn is determined by the rates that the ECB demands from credit institutions for lending them money.
What happens is that commercial banks do not wait for the ECB to decide. They anticipate your movements and adapt the cost of the loans they grant to your expectations. That is why the Euribor has fallen faster than the ECB's official interest rates, which have remained in a range between 4 and 4.5% since September last year.. That is, at historical highs.
In any case, the ECB has given signs that the first cuts in interest rates could come well into spring.. Therefore, the Euribor is expected to resume its decline in the coming months.. The consensus of Funcas analysts predicts that the index will stand at 3.25% by the end of 2024. Consequently, mortgage payments should continue to decline little by little as the year progresses.
“The Euribor is a volatile indicator and that it rises or falls a little each month is to be expected. What we do not expect is that it will once again be above the 4% barrier,” says Simone Colombelli, director of Mortgages at the mortgage comparator and advisor iAhorro.. “Although the Euribor has risen slightly, if we look at its long-term evolution, we are still in a moment of stability within the decline that this indicator is expected to register,” he adds.. “The market was overly optimistic when it expected a quick drop in ECB rates and that is why the Euribor reached very close to 3.5%,” says Miquel Riera, an analyst at HelpMyCash.