Wednesday, January 19

The Euribor rises in October. Forecast for the coming months and the new mortgage prices

The Euribor, which is the index with which the interest on the vast majority of variable mortgages in force in Spain is calculated, closed October with a good rise. Its average monthly value is -0.478 percent; significantly above September (-0.492 percent).

Butwhat will happen to mortgages linked to the Euribor? According to the financial comparator HelpMyCash, those that are reviewed annually in the coming weeks will become cheaper, while those updated every six months will become more expensive.

As a general rule, variable mortgage interest is reviewed once every six to 12 months.

On the date indicated in the deed itself, the bank adds the last value registered by the Euribor (or the previous one, depending on its policy) to the credit differential to calculate the new interest rate, which will determine the amount of the installments to be will be charged until the next review.

Therefore, Mortgages with annual review will have the installment reduced, since the value of the Euribor in October 2020 was higher (-0.466 percent) than this year. For example, for an average mortgage loan of 150,000 euros with an interest of Euribor plus 1 percent and a term of 25 years, the monthly payments would be reduced by 79 cents (9.48 euros for the entire year).

On the other hand, according to HelpMyCash, those who have a mortgage with semi-annual review they will not be so lucky: the value of the Euribor was lower six months ago (-0.484 percent in April), so the monthly payments of these clients will be slightly more expensive.

Following the previous example, the amount of the installments of an average loan would increase by 39 cents (2.34 euros for the whole of the semester).

Why has the Euribor risen?

The new value of this index will be the highest registered in 2021, as well as the highest since October 2020.

It is logical to wonder, therefore, why the Euribor has suddenly risen to those levels after being 11 months below -0.48 percent. HelpMyCash analysts explain to that the reason could be rising inflation in the euro area, which skyrocketed to 3.4 percent in September.

With rising inflation, the chances that the European Central Bank (ECB) will raise its interest rates in the future (to 0 percent since 2016) are higher. It is one of the measures that can be used to contain it.

These perspectives may have led financial institutions to raise the interest they apply on interbank loans, which is the one used to calculate the value of the Euribor.

It must be said, however, that the ECB is not considering raising its rates at the moment.

The president of this body, Christine Lagarde, said a few days ago that they expect inflation to continue rising in the short term, but that her forecast is for it to fall over the next year. And for this reason, the idea of ​​the European banking supervisor is to maintain its policy of economic stimuli, including rates at 0 percent.

Will the Euribor stay on the rise?

Under this premise, most forecasts suggest that the Euribor will remain below 0 percent for a few more years, although with an upward trend.

The most recent prediction in this regard is that of Bankinter’s analysis department, which expects this index to rise to -0.32 percent in 2022 and to -0.18 percent in 2023.

In the short term, then, it seems that the Euribor will not yet tread positive ground.

It should be remembered that this index remains below 0 percent since February 2016 and that reached its historical minimum value in January of this year (-0.505 percent). Its all-time high, on the other hand, was recorded more than a decade ago: 5.39 percent in July 2008.