The Euribor rate continues to provide relief to mortgage holders, falling to 3.68% in May.

The Euribor rate continues to provide relief to mortgage holders, falling to 3.68% in May from 3.703% in April. This leaves the core loan index below where it was just a year ago, as it averaged 3.862% in May 2023. That is, those with a variable rate mortgage (12 months) who renew their installments in June will do so with the “cheaper” Euribor rate.

Families who renegotiate their mortgages every 6 months will also receive a discount on their loans. In November, Euribor rose to an average of 4.022%. Lower mortgage rates also make it easier to access financing for families who need it now and, of course, for businesses.

A few examples will help you better understand the essence of the relief. “If we calculate how the installments will be for those who have a mortgage that has an annual review, and take as a guide an average mortgage of €150,000 repayable in 25 years, with an interest rate of Euribor plus a differential of 1%, we can say that this figure will represent a moderate reduction (about 190 euros per year). In contrast to what happens to those who do a semi-annual review, they will see a significant reduction in mortgage payments (almost €30 less per month),” explains the team of experts at online comparator HelpMyCash.

The fall in Euribor comes ahead of the European Central Bank’s (ECB) first cut in official interest rates as part of an austerity cycle the institution launched in July 2022 to combat inflation. In this cycle (which was carried out by all central banks of Western economies), interest rates in the eurozone rose from 0% to 4.5%, a maximum not reached since 2008.

This classic (or orthodox) monetary policy strategy attempts to combat rising prices by stifling the demand of families and businesses – or, what amounts to the same thing: by stifling economic activity as a whole by increasing the cost of mortgages, loans and financing – without considering the that the source of the inflation crisis was the supply of energy and other raw materials. Indeed, its consequences could be very aggressive, especially for the most vulnerable, at a time when banks are making more and more money.

Currently, the ECB’s own economists’ forecasts suggest inflation will fall to 2.3% on average in 2024 (close to the theoretical target of 2%), with price growth already slowing to 2.4% at the inter-annual pace in April in the eurozone. , the risk of a recession in Germany or France is very high, demand for loans is falling more than expected…

On June 6, the monetary authority will update its estimates and decide to reduce the official “price” of money by 0.25%, from 4.5% to 4.25%, as proposed by members of its board of directors. It is unclear whether it will continue to lighten the pockets of families at the July and September meetings.

This is not supported by inflation data for May in the eurozone as a whole, which became known this Friday and showed that prices rose by 2.6% compared to the same month in 2023. that in April. This scenario could doom Euribor to stagnation. In fact, its daily price (as can be seen in the chart of this information) increased slightly at the end of May.

The mortgage index is the result of a weighted average interest rate at which the eurozone’s 19 major banks lend to each other. It is calculated every day, although the amount used in installments on the loan is an average for each month.