Euribor resumes its decline in October and marks a new annual low above 2.7%.
October has just begun, and after a slight increase of 0.002 basis points in the first daily data, this Wednesday, October 2, 2024 The mortgage index falls slightly, but enough to mark a new yearly low for its daily rate. placement of data at the level of 2.745%.
Looking at the last few days, after five consecutive days of declines, Euribor rose 0.016 basis points on Friday compared to the previous day, although it was already confirmed that it would close below the 3% barrier. Then, according to the latest data of the month, the mortgage index fell on Monday by 0.19 basis points compared to previous data, and this Tuesday it rose by 0.002 points, confirming the stabilization of the index, since today it is also down slightly, by another 0.004 basis points.
Now that September is over, The Euribor index recorded its sixth monthly decline in a rowwith an average of 2.936%, which means it fell below the psychological barrier of 3%, something that has not happened since November 2022.
What happened to Euribor?
Since the beginning of September, the core mortgage lending index has been showing downward data, a drop that was already predicted to close below 3%which has not happened since November 2022 and represents the sixth consecutive month of decline. Now, since the beginning of October, Euribor has maintained a stabilizing trend that remains to be seen if it continues throughout the month.
In fact, given this situation, financial markets are already predicting the collapse of Euribor. adoption of mortgage rates below 2% in 2025. In particular, while experts have been reluctant in recent weeks to discount the index’s latest aggressive mid-term decline, futures expect Euribor to reach 1.8% by the end of next year.
Experts’ forecasts are outdated. At the moment, Euribor is trending downward, so much so that analysts who follow financial markets and the markets themselves They are not keeping up with the mortgage index. In fact, Euribor is already below the forecasts set before the summer.
Experts had predicted that the Euribor rate would end at 3% by the end of 2024, but the speed at which the cuts are accelerating suggests that The mortgage lending benchmark will remain below this level. Funcas, one of think tank the most prestigious in the country, prepares a panel of experts that includes economic forecasts of the country and, by expanding certain financial variables such as Euribor, and places it in 2.83%. Meanwhile, according to Bankinter analysts, the year will end 2.75%.
Why did it fall like that?
A pronounced drop in the Euribor rate, which is very good news for those with variable rate mortgages who will have to renegotiate their repayment installment in the near future. driven by expectations of rate cuts central banks.
In fact, the ECB and Fed cut rates this month. The European Bank was the first to do this. Lagarde, the organization’s president, announced a new rate cut from 3.75% to 3.5% after June. Second, the Fed’s latest meeting ended on Wednesday this week with a 50 basis point rate cut (equivalent to two “simple” 25 basis point cuts). And the best part is that for the next meetings, Financial markets expect sharp rate cuts this could accelerate the decline in Euribor.
For the Federal Reserve meeting next November 7 Another 50 basis point cut is already expected. In the case of the ECB, even more influential in the evolution of the Euribor, a movement on the same scale as that of the Fed is already beginning to creep in. for the meeting on December 12. Markets discount two stocks in a row by 25 basis points.
How will this affect my mortgage?
The downward trend experienced by Euribor directly affects mortgage reviewsboth semi-annually and 12-monthly, as banks restate variable mortgages with monthly averages rising or falling from six or twelve months ago.
To see this with an example, for a mortgage of €140,000 for a term of 30 years (360 months) with a difference of 1% and taking September 2023 as a reference (as most mortgages are reviewed after 12 months), when the Euribor rate closed at level 4.149%, The monthly fee was 757.81 euros.
Now, with the final September 2024 average of 2.947%, the mortgage payment of homeowners who have a September review will fall to €632.06, meaning that They will pay 125.81 euros less than a year ago. and the first drops in monthly mortgage payments will begin to be noticed.
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