Accelerated decline in Euribor exceeds expectations

The acceleration of the Euribor decline in the month before the end of the year has already left behind forecasts that it would end at 2.5% in 2024. In the month of November it already reached this figure, so it is expected to fall to more in December. Over the past two months, the year-on-year decline was about 1.5 points. This is the biggest drop in the figure in 15 years.

The rate is losing ground due to less restrictive monetary policy and rate cuts. Inflation has been better than expected, Germany and France’s powers are faltering, and the combination opens the door to more cuts by the European Central Bank (ECB). Euribor always anticipates and ignores the movements of the organization led by Christine Lagarde. “It was not expected that it would fall so much, at least in the future. Homework on inflation was done and forecasts had to be adjusted. The trend is downward,” says Ricard Garriga, CEO of mortgage platform Trioteca. Expect a close of 2.3%-2.4% in December, numbers that have already been seen in the daily price.

Further rates of decline depend on the decisions of the ECB. A quarter-point rate cut is expected at the December 12 meeting, which could be repeated in early 2025. “Barring unexpected events, there will be more stability in 2025, fluctuating between 2% and 2.5%. – predicts Garriga.

The current picture refutes predictions. Funcas’ latest commission pegged the Euribor rate at 2.69% for December. And 2.35% by the end of 2025, similar to what has already been observed today. In particular, CaixaBank Research in early November expected 2.60% at the end of 2024. In 2025, it will close at 2.18%, it noted. A BBVA study in mid-October predicted an average of 2.60% in 2025, leading to an increase that seems distant today. Companies note that if they do not update data in their future economic reports, near-term expected levels will already be exceeded in a positive way. The same applies to the 2.75% planned by Bankinter at the end of the year. This forecast was published a month ago. Taking a broader view, it mentions 2.50% for 2025. The further back you go, the further the forecasts move away from what is visible.

Ferran Font, research director at Pisos.com, said the year was marked by geopolitical conditions that brought uncertainty, making it difficult to accurately forecast inflation and how central banks would respond. “It is difficult to make definite forecasts in this context,” he comments on Euribor, which is leading to a larger fall than expected. The firm’s forecast is 2.25%-2.5% through 2025, keeping in mind that there could be surprises in inflation due to international factors such as the arrival of Donald Thurmp.

Cheaper financing opens the door to increased demand and further pressure on prices.

Currently, holders of mortgages whose loan terms are renegotiated in December, using the 2.50% rate from November, will save around €1,609 per year. The calculation is made for a mortgage of about 150,500 euros – the average of the latest INE statistics – Euribor+0.99% and for 30 years. The commission will increase from 809.17 to 675.10 euros. “This reduction represents significant savings for those with a mortgage and better contract conditions,” says Font. Opens up funding to more groups, such as youth. “There will be more transactions, low rates are a tailwind and make buying a first home attractive,” he notes. This year, 425,000 mortgages will go from 485,000-500,000. In a market with strong demand and tight supply after prices rose 14% nationwide in 2024, Font also points to price increases in 2025. It will be 12%. “If the market feeds without an increase in supply, which is likely to happen, that could mean an increase,” he said.

Read also

Gabriel Trindade, Maite Gutierrez