Euribor Mortgages | The Euribor rate has reached a one-year low, leading to the biggest drop in mortgage interest rates since 2013.
Euribor, the benchmark index of most variable mortgages sold in Spainfell this Wednesday to a one-year low of 3.503% and gave a respite to many Spanish families. Thanks to this fall, mortgage holders who check their credit using this month’s data will see their mortgage payments reduced. about 50 euros per month or 600 euros per year. Today, Euribor has lost three thousandths compared to the percentage reached on Tuesday, at 3.506%.
On March 5, it hit a yearly high of 3.751%, but has been slowing since then. The core mortgage lending index has been falling since March, when it ended the month at 3.718%, ended April at 3.703%, May at 3.680% and June at 3.650%. The average for July is currently 3.57% (-0.079), and the average is expected to fall to 3.541%. If the monthly trend continues unchanged will mark the biggest drop in mortgage rates since 2013..
Since April, mortgage holders in Spain who have renegotiated their installment have already been paying less on their mortgage, as the Euribor rate was higher in these months last year. For example, in June, the Euribor ended at 3.65%, while last year in the same month the rate was 4.007%.
Inflation is moderate
In addition, this Wednesday it became known that the inflation rate in In June, the eurozone grew by 2.5% year-on-year.which is one-tenth lower than the price increase seen in May, according to the second reading of data released by the community’s statistical office Eurostat, while in the European Union (EU) as a whole the figure fell by one-tenth to 2.6%.
A slight slowdown in price growth in the Euroregion in June was reflected in energy costs rising 0.2% after rising 0.3% year-on-year in May, while fresh food prices rose 1.3% year-on-year, five-tenths less than in the previous month.
What will happen to Euribor in 2024?
Moderating inflation is an incentive for the European Central Bank (ECB) to continue its current rate-cutting policy, which began on June 6. At its meeting last month, the monetary authority cut the price of money by 25 basis points, so that the base rate for its refinancing operations fell to 4.25% from the previous 4.5%. The monetary authority fulfilled the script and cut interest rates for the first time since 2019. The ECB will meet again this Thursday although no rate cuts are expected.
The issuing institution cut rates after leaving them unchanged at four consecutive meetings.The ECB hit the brakes at its October 2023 meeting after ten consecutive price-of-money hikes that took it to its highest level in more than 20 years.
Dutch Bank President and ECB Governing Council member Klaas Not assured on Monday that he was satisfied with market forecasts that take one or two interest rate cuts this year for granted.
How Euribor Works and Its Impact on Mortgages
Among other things, Euribor is used by many banks as a benchmark index to set the interest rate on floating rate mortgages in Europe, which is especially the case in Spain. That is, the interest on loans fluctuates depending on the change in this value: If Euribor rises, mortgages will become more expensive; if it falls, mortgages will become cheaper..
The increase in Euribor is a response to increasing tensions in the financial market. Its increase means that banks charge other financial institutions higher interest rates for lending them money, and at the same time they increase the interest they charge their customers on mortgages.