Euribor’s fall opens doors to cheaper short-term mortgages

The 12-month Euribor’s decline of just over 4% from June highs was met with muted euphoria in Spanish banks.

Mortgage index changed address The highest level has been recorded since June 11The month’s high is 3.728% at the daily rate, which is significantly higher than the 3.578% at the close of the month.

Euribor says goodbye to June by 3.65% averaging slightly lower than 3.68% in May and even further from the yearly high of 3.71% in March.

The relief for mortgage holders will be even greater if we take into account that in June last year the Euribor rate jumped above the 4% level for the first time. Such a large interannual decline has not been recorded since April 2021, when the Euribor was still negative.

For practical purposes, taking into account a €150,000 mortgage for 25 years with a 1% difference compared to Euribor, households that now review their loan annually will benefit from 30 euro discount from monthly feefrom 1002 to 972 euros. This is a saving 360 euros per year.

Relief

For banks, The downward movement is also a relief that can make a difference in your short-term mortgage policy.

The sector has endured strong growth that saw Euribor receive a 25 basis point rate cut by the European Central Bank (ECB) on June 6, in which the institution did not specify a roadmap for future rate cuts.

Banks react to increase in preliminary monthly Euribor rate above 3.70% (i.e. a return to the highest levels since March) in the first third of the month with a calm load.

Since then, the most aggressive market players have kept rates on prime loans unchanged, waiting for the trend to change, which happened quickly and decisively.

In recent weeks, the sector has even had to slightly adjust prices protect your profits in a scenario of great uncertainty, as evidenced by the fact that the average lending rate rose slightly in May to 3.861%; compared to the previous 3.825%, according to the Spanish Mortgage Association (AHE).

Offers

However, the most generous structures consolidated their offer. Coinc, Openbank, EVO Banco and Santander (see attached table) have rates below 3.5% per annum (the equivalent annual rate including all costs) on a fixed rate. On a floating rate for up to three mortgages (those Sabadell, EVO Banco and Kutxabank) offer spreads of less than 0.5%.

But now banks could afford to be more flexible in their mortgage pricing policies and even resume the intense struggle that took place in the first third of the year.

Relaxation of Euribor It guarantees very competitive rates, especially on fixed and blended rates, when banks press the commercial accelerator, signalling that they have the ability to hedge against Euribor volatility, which is particularly significant in the first half of the year.

How much further Euribor might fall in the short term will depend on the strength of the eventual decline in credit prices.

“As the latest daily data for June was 3.57%, we expect a decline in July that could lead to 3.5%,” Asufin says, optimistic that the market will fall further. He believes that the decline could widen to 3% by the end of 2024.

Other firms are more cautious. Kelisto does not see the index below the 3.4% to 3.5% range by the end of the year, while Bankinter sees it at 3.5% in 2024 and 3% in 2025.