Here’s how it will affect your mortgage.

After breaking the psychological barrier of 2.7% late last week, Euribor, the index most variable mortgages refer to, has risen again this year. Monday, October 7, 2024, again at 2.712%.breaking a streak of three consecutive falling days.

In fact, September marked the sixth consecutive month of closing declines below 3%, something not seen since November 2022. Additionally, last month’s closure marked a low that never happened. December 2022. So it was a joy for mortgagees who had to renegotiate their payment in September. with a final close of 2.936%.

Stabilization in recent days

As for recent days, the most noticeable decline in recent weeks began last Thursday, when the index fell more sharply, losing 0.033 points compared to Wednesday. However, the index’s yearly low was recorded in the latest data on Friday, October 4, when it fell another 0.024 basis points from the previous day.

Thanks to this fall, the index overcame the psychological barrier of 2.7 down, amounting to 2.688%. This Monday it rose a total of 0.024 basis points.once again rising above the aforementioned barrier and confirming the stabilization of the index, which has remained at these values ​​around 2.7 since the beginning of October, with a preliminary monthly average of 2.721%.

What’s going on with 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 a 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Experts’ forecasts are outdated.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 the most prestigious think tanks in the country, prepares a panel of experts that includes the country’s economic forecasts and, as a result, certain financial variables such as Euribor, and places it on the list 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 October 2023 as a reference (as most mortgages are reviewed after 12 months), when the Euribor rate closed at level of 4.16%. The monthly fee was 765.30 euros.

Now, with a provisional average for October 2024 of 2.721%, the mortgage payment of homeowners having a review in September will fall to €615.70, meaning that They will pay 149.6 euros less than a year ago. and the first drops in monthly mortgage payments will begin to be noticed.