Saturday, November 26

The Euribor flirts with the lows of the year

The Euribor, the index to which most mortgages are referenced, awaits the result of the meeting of the European Central Bank, this Thursday, trading at the lowest since August.

Specifically, the indicator trades in monthly rate at -0.499 percent, the lowest level since it closed in August at -0.498 percent.

The Euribor, which is the interest rate at which different European banks lend money to each other, and has a maturity of 12 months, has been discounting since the beginning of December that the new omicron variant will force the ECB not to be too aggressive in its meeting despite the fact that inflation in the eurozone remains at highs.

Thus, at a daily rate, the Euribor began in December flirting with -0.50 percent, the level at which the credit facility has been since March 2016. If it remains so, the Euribor would erase the slight increases from which it was marked at throughout 2021 (without leaving negative territory) and would return to the levels with which the year started.

The Euribor will remain negative throughout 2022

The Euribor will remain negative throughout 2022. These are the estimates that Bankinter handles.

The bank’s analysts anticipate another 24 negative months for the indicator despite the fact that they expect the ECB to end the pandemic bond purchase (PEPP) in March 2022.

A) Yes, the indicator will close 2022 at -0.32 percent, because experts believe that the ECB will still take time to raise rates. Also, even if the ECB stops buying bonds through the PEPP, It will continue to do so through the APP program, quantitative expansion, at a rate of 20,000 million euros per month.

In addition, it is among the ECB’s plans to launch a new program that would complement the APP from April, and that could also cost another 20,000 million euros in additional purchases, to avoid a rise in spreads for the peripheral countries, especially , Spain, Greece, Italy and Portugal.

By 2023, the Euribor would not leave the red numbers either, closing the year at -0.18 percent.

A crucial week for central banks

The The evolution of the Euribor in the remainder of the month will depend on the result of the central bank meetings this week. For now, the news about omicron seems to allow the initial shock to be dispelled, because the severity is reduced and the effectiveness of a third dose.

The Fed is expected to accelerate tapering on Wednesday, something the market may have already priced in, seeing recent rises in equities and little change in the bond market.

For its part, the ECB could start cutting the amount of assets it buys each month in half starting in April. The ECB will debate options on how to adapt the bank’s regular asset purchase program after its PEPP ends in March, while the Fed will likely announce a quicker denouement of pandemic-era stimulus plans.

According to a Reuters poll of ECB analysts, they considered that a foreseeable decline in high inflation in the euro zone by the end of 2022 means that a rise in interest rates is in the offing, with which, the rise of guys is far away.

The Bank of England, Japan and Switzerland will also provide an update on the price outlook and policy guidance for 2022. For its part, no changes are expected in its monetary policy.

Variable rate mortgages will continue to get cheaper

If this ends, the variable rate mortgages that are reviewed with the December Euribor will remain practically unchanged, since a year ago the Euribor closed at -0.497 percent, just two thousandths below the end of December this year.

This means that the mortgaged will hardly notice a reduction of a few cents in their monthly payments because the variations experienced by the Euribor for a year are minimal.

In the case of a 150,000 euro mortgage at 30 years with Euribor +0.99 percent, it will now pay 536.23 euros compared to the 536., 1 that it paid last month. The savings are only 0.28 euros per month or what is the same 3.36 euros per year.