Euribor closed February with an increase – Idealista/news
Euribor changes its trend and rises again. After the fall in January The indicator ends the second month of the year with a monthly average of 3.671%.marking its first rebound since October.
In the second month of 2023, the rate was 3.534%, which means that Variable mortgages, which are subject to annual renegotiation, will see a slight increase. For the average mortgage, the increase would be around €10-12 per month, which equates to around €120-140 per year, the lowest in almost two years, although this figure could be lower in cases where more capital is repaid. (that is, for loans that have been in the process of repayment for years).
The good news is that those with a semi-annual view will continue to experience a reduction in their monthly payment, as the 12-month Euribor rate was above 4% in August 2023.
The ECB is behind the recent rise
In the second half of 2022 and the first half of 2023, as the European Central Bank (ECB) raised interest rates, Euribor experienced the fastest recovery in its history, although Since October, when it reached 4.16%, a downward trend has accumulated.given the reduction in interest rates expected in the coming months as inflation declines.
However, in recent weeks, several ECB members have hinted that the reduction in money prices will still take time, so Euribor responded by increasing it. Austrian National Bank Governor and ECB Council member Robert Holzmann recently assured that it was unlikely that the eurozone would cut rates before the Fed and defended a scenario in which ECB waits before cutting rates, even a little late, it would be ‘less harmful’ than one where you now lower rates and for some reason you have to raise them again. A theory that was evident at the institution’s last governing body meeting in late January.
In this scenario, forecasts pointing to the first move in April lose weight in the market in favor of those who believe that the first rate cut could occur in June.
Stable Euribor in the short term
According to experts, Euribor’s monthly volatility is predictable and could become a general trend in the coming months. At this point, it is not expected that there could be a sudden change that would raise the indicator to the 4% level or lower it to the 3% level.
The turning point will be the first interest rate cut by the European Central Bank (ECB).which currently remains at 4.5%, will cause the Euribor to fall more rapidly than it has seen recently, just as it has recovered significantly during the cycle of 10 consecutive hikes carried out by the euro custodian between July 2022 until September 2023
The Savings Bank Fund (Funcas) and CaixaBank estimate that the 12-month Euribor rate will end the year at around 3%, about six-tenths below current levels, while Bankinter believes it will fall less before the end of 2024. For its part, the Association of Financial Services Users (ASUFIN) predicts a faster decline: by mid-year Euribor will approach 3%.
But In the short term, all indications are that growth will be even greater. In the last session of the month, Euribor recorded a daily rate of 3.749% and was above 3.7% for five days in a row.
Mortgage rate cuts will increase in the spring
Experts predicted at the start of the year that the long-awaited reduction in mortgage payments could arrive in the spring for those with an annual review. Savings are expected to increase throughout the year.
In its latest report on the financial situation of households and companies Bank of Spain He believes the impact of rising interest rates on the economy has been resolved and expects families and businesses will soon begin to see a decline in the value of their debt, including mortgage debt.
“Given current market expectations regarding interest rates, In March 2024, the renegotiation will become downward for contracts with annual renegotiation linked to the 12-month Euribor rate. cuts that will exceed 150 basis points for those renewals that occur in the last period of 2024,” says the Bank of Spain. And he notes that “between December 2023 and March 2024, 7% of outstanding balances” The cost of variable rate mortgages (almost 70% of all mortgages in Spain) will increase by 100 basis points or more, while 10% of mortgages will fall by at least 50 basis points.”
Nevertheless, Experts expect big changes to occur in the second semester.
“The impact should be positive, particularly on the 12-month Euribor rate, although in the short term we are not likely to see a significant fall until the ECB’s base rate cut materialises. For those with a variable mortgage, especially those that have revisions from April, will begin to see the effects of this Euribor drop, and those reviewing in the second half of the year will see their monthly payments fall by a higher percentage. For those looking for housing, this is also good news, since at the beginning of the year we already saw how most banks revised their lower mortgage offersand we hope that this trend will intensify throughout the year,” explains Juan Villen, CEO of Idealista/mortgages.
In the same spirit Association of Financial Users (ASUFIN) indicates that the decline in mortgage payments “will be more intense as the year progresses, especially in July and September” when the Euribor rate was above 4%. He forecasts Euribor could be around 3.3% in March (up from 3.647% in March 2023) and drop to 3% in Junewhen interest rates are expected to start falling.
Leire Lopez, analyst at the Spanish Mortgage Association (AHE): adds to this forecast and explains that “mortgages that are renegotiated semi-annually and are due for renegotiation now may already see a fee reduction early this year, but mortgages that are renegotiated annually will not.” until April or May, taking into account that the loan will be updated semi-annually or annually according to the benchmark index value one or two months before the review period.