Euribor falls for the second month in a row and makes mortgages cheaper by almost 200 euros per year
Rope Euribor it tightens the bills for many families every month it weakens. The underlying index of most adjustable rate mortgages underwritten in Spain, which dominates the market. will close May with a second fall in a row. Since there is one day left until the month closes, the average price of the indicator is 3.679%which is lower than a year ago, when it was 3.862%.
As a result of this reduction, those who review their variable mortgage annually and do so in June will benefit from fee reduction of 15.35 euros less per month (184.20 euros less per year) for the average mortgage in Spain, representing a reduction of 1.83%, according to calculations Savings website Kelisto.es.
The good news will continue for another month for those who review their mortgage every six months. If applicable, the fee will be reduced by 22.39 euros per month (134.34 euros per semester) for the average loan, which represents a decrease of 2.62%.
Despite this year-on-year decline, Euribor remains more or less stable, so he says Sergio Carbajal, head of mortgage lending at Rastreator“We will have to be alert to a possible interest rate cut on June 6 by the European Central Bank, as well as a change in the Euribor trend.”
How does this explain Mikel Riera, mortgage analyst at financial comparator HelpMyCash“Euribor, roughly speaking, represents the average interest rate at which major European banks lend to each other. If the ECB is expected to cut rates, these institutions expect that it will be cheaper for them to finance themselves through this institution and therefore they make their interbank loans cheaper, which reduces the price of Euribor.”
Estefania Gonzalez, representative of Kelisto.esguarantees that Euribor was on a rollercoaster ride in May due to uncertainty over which direction the European Bank would move following the June rate cut. this is already taken for granted and that, according to the organization’s own vice-president, Luis de Guindos, will be 0.25 points.. His words, Gonzalez says, were followed by others with completely different opinions: from those who argued for not excluding a second cut in July, François Villeroy, governor of the Bank of France and member of the ECB; to those who preferred to wait until September, including representatives ECB Chief Economist Philip Lanewho stated that The restrictive policy will continue until the end of 2024. and that the debate about its normalization will not begin until 2025.
Containment
Manuel Pinto, analyst at the investment platform XTBguarantees that evolution of inflation in the coming months it will be ‘one of the main keys’ to understanding the direction the ECB will take. “Next month we expect a slight recovery in prices. Not helped by high wage growth, a key indicator for Christine Lagarde (ECB President), which exceeded all expectations, rising by 4.7% in the first quarter of the year – the most since 1993, and in the case of Germany the situation worsened even further. an increase of 6.2%.”
From XTB they believe that Euribor could remain at levels similar to current levels for a longer period of time, despite the rate cut that is not being factored into June. The reasons are that, on the one hand, “we consider rising wages, improving economic activity and the existence of possible external shocks that stimulate commodities as the main reasons for maintaining higher rates, while not forgetting the crushing inflation that could cause possible weakness of the euro,” explains Pinto. Added to this is more accurate data on the amount of money in circulation in public places, as well as the fact that the service sector has begun to slow, labor productivity has not risen to the level of the United States, and the latest ECB consumer surveys estimate lower inflation in the country. Average degree.”
Analysts worry whether the rate will continue to decline
He Comparator Mortgage Director and iAhorro Mortgage Consultant, Simone Colombelli, is of the same opinion as Pinto, given his analysis of the evolution of inflation. “Lagarde is not going to back down from her decision, but we cannot expect a bigger fall: she will reduce the expected 0.25 percentage points, because this is unlikely to change the current picture, since we will continue with very high interest rates,” he assures. .
Riera is also cautious and assures that “it remains to be seen whether the Euribor will be affected by the ECB rate cut”, taking into account uncertainty facing the eurozone economy due to conflicts in Ukraine and Israel. “These geopolitical tensions could lead eurozone countries to increase their public spending on defense and military industries, which could cause inflation to rise,” he points out.
Caution also appears to be prevailing among mortgage customers, despite the improvement in the Euribor rate over the past two months. ” Fixed and mixed mortgages continue to lead the market with total transactions of 74% and 18% respectively, since these conditions, especially mixed ones, guarantee a fixed TIN for the first years of 2.25%, while in the case of a fixed mortgage this percentage can be found in our comparison below 3% ” says Carbajal.