We already announced it last September: variable mortgages would skyrocket if Euribor continued to rise. And for now, there is no brake in sight. The benchmark indicator for the vast majority of variable rate mortgages in Spain, the Euribor 12 monthsis still rising sharply and has surpassed the daily rate of 3,5%. It would be necessary to go back to December 11, 2008, in the midst of the economic crisis, to find similar numbers.
This record number comes shortly after the European Central Bank (ECB), through some of its members, declared the need to vary this value to face the economic recession and the enormous inflation that is plaguing the entire continent. Therefore, at the meeting held on February 2nd, they decided increase interest rates up to 3%then a clear message is sent to stop price escalation and achieve maintain inflation at 2%.
In the last two sessions he even positioned himself above the barrier, increasing by 41 thousandths It is reaching 3.518% this February 14th. It's curious but the provisional average for February is 3.442% compared to the 3.33% with which it closed the month of January. Just a year ago, when the pandemic crisis broke out, Euribor was still positioned at negative values, around -0.33%.
How does this directly affect users?
With these new Euribor values in hand, dealing with the installments of a variable rate mortgage becomes a really complex challenge. And it is that if we ask for a loan of 180,000 euros for 25 years, with 1% differential at Euriborthe fee will increase from 651 euros to 994 euros, which translates into an increase of 343 euros per month and 4,116 euros per year.
predictions
The Governor of the Bank of Latvia and member of the Governing Council, Martins Kazaksas well as the vice president of the monetary authority, Luis de Guindosguaranteed that price increases will not stop in March, when another increase of 50 basis points to 3.5%. In this context, Brussels is optimistic, as the reduction in energy prices and the good performance of the European labor market add to the good forecasts for euro zone GDP for 2023. Thus, although inflation is expected to continue to rise, it is expected to continue to rise up to 5.6%instead of the 6.1% originally estimated.
In this context, experts say that interest rates may continue to risealthough this does not go hand in hand with a collapse in economic growth. On this occasion, the ECB looks like it won't budgein the face of pressure from the governments of the euro zone countries, as they consider this to be the only formula to end high inflation.
The Governor of the Central Bank of the Netherlands and head of monetary policy at the ECB, klaas knotguarantees that they will be carried out further interest rate hikes 50 basis points in the following meetings scheduled for March 16th and May 4th, reaching 3.5%.
But everything must come down, and it is expected that at the end of this year the Euribor will reach a ceiling so that from 2024 it will begin to move in the 2.2% of spread. However, we will have to wait and see how the indicator behaves during spring, a time when significant changes are expected and which will set the pace for the rest of the year.
What the analysts say
The Spanish virtual platform hipoppotamus Ensure that Euribor will fluctuate between 3.5% and 4% during the first quarter of this 2023, offering an unattractive scenario for new mortgage holders, who will therefore choose to dive into a fixed rate mortgage, as fixed rates tend to be very similar to Euribor values. Likewise, they highlight that financial institutions will continue to offer competitive floating rates.
in analyst XTBJoaquín Robles states that: “Euribor could trade between 3.75 and 4% this year”opinion reaffirmed by the deputy director general of floorEmiliano Bermúdez, who makes it very clear that the indicator will continue to rise until it surpasses the 4% border.
And now what?
Almost all experts consulted agree with the idea that the ECB will implement a more aggressive policy, starting in March, after analyzing the behavior of new mortgage loans. However, there is also a real possibility that Euribor will start to slow down, although this is less likely if we take into account that inflation in the Eurozone has positioned itself at 8.5% during the month of January.
It is likely that the price of money is about 3.75-4% throughout the current year, which will cause Euribor to clearly exceed these values until inflation moderates to, at least, 3%. Meanwhile, Spanish families will continue to face an extra cost for increases in monthly variable mortgage payments which will have their conditions reviewed, although this depends on the year the mortgage was signed or the capital outstanding, among other important factors.