It had been years since the Euribor had not grabbed so many headlines. The blame lies with this indicator, the most widely used in its 12-month reference to calculate the price of variable mortgages in Spain, which has led the steepest rise in its 23-year history since last January. And also the third (for now) longest. As a result, millions of borrowers have seen their loan bills rise to levels that seemed impossible last December. Then, the Euribor touched its historical floor below the negative half point. This December it has ended above 3%, a barrier that was overcome this Thursday for the first time since 2008. The monthly average remains, definitively, at 3.018% and the escalation does not stop: the mortgages that are reviewed with the reference of the last month of the year they will become more expensive by 44.5%. For an average loan (137,921 euros in 2021, to be paid in 24 years, according to the INE) that contains a differential of one point, that translates into paying 226 euros more per month or 2,715 euros more per year.
The Euribor has risen in every month of 2022. And two moments have set its evolution on fire: the war in Ukraine and the first increases in the official rates of the European Central Bank (ECB). With the first, what until then seemed like it was going to be a slight increase in price, it picked up momentum. The war conflict aggravated the general rise in prices, starting with energy prices. “The idea throughout this year is that inflation is here to stay for a while,” sums up Hugo Rodríguez, a researcher at the CSIC’s Institute for Economic Analysis. Consequently, the European type of interbank offer (from whose name in English comes the acronym euribor) began to grow because it expresses the interest in which a group of banks lend money to each other. By discounting these entities that monetary policy would have to change, which would make the official price of money more expensive, they logically raised 12-month loans.
The second act of the drama began in July. That month the ECB policy shift came true. The euro regulator raised policy rates for the first time in six years. What’s more, it was the biggest rise (half a point) since the year 2000. And it did not stop there: it announced that it would not be its last move and it has more than complied with it. In total, 2022 has seen four increases by the ECB, two by half a point and two by 0.75 points. The latest, announced in the middle of this same month, has left the official price of money at 2.5%. It is a lot if you compare it with the 0% of six months ago, but it is still far from the fork between 4.25% and 4.5% that the Federal Reserve manages on the other side of the Atlantic, more early risers and bolder in its rate hikes.
The objective of all this monetary policy is to contain prices (maintaining inflation at 2% in the medium term is the main mandate of the ECB) even if it is at the cost of curbing consumption. And one of the inevitable side effects is the increase in the cost of loans. This has been progressive. Taking the average mortgage for 2021 as a reference, those who recalculated their loans with the January, February or March reference hardly noticed it: the monthly increase did not even reach 15 euros. But in April that figure was almost doubled and by summer it was already around 100 euros. September, when the second of the four increases in official rates took place, saw the most pronounced monthly rise in the Euribor in its entire history: almost one point in 30 days. And in the final stretch of the year, when the rate of rise has slowed, but the differential with last year has continued to widen (because then interest rates fell and now they rise), variable mortgages have ended up becoming more than 40% more expensive and above 200 euros per month. Since September, every month has resulted in the highest year-on-year rise in the indicator’s history: until this year, it was just over two points; in December it is already at 3.5.
It is an unmitigated blow to many family economies, also affected by the general rise in prices and the loss of purchasing power. “It affects millions of people who have seen or are going to see how their mortgage increases a lot,” emphasizes Carlos Martín, head of the Economic Cabinet of CC OO. In Spain there are some 3.7 million variable mortgages, and the union calculates that borrowers, with inflation and expected wage increases, risk “a loss of purchasing power of 16%” in 2023.
New uploads in 2023
That of the Euribor has been the Time.news of an announced rise. And it has caused profound changes in the mortgage market. Even long before the war in Ukraine, when the pandemic forced the period of extraordinarily low rates to be extended, the buzz was that the time for cheap loans was coming to an end. Symbolically, the first month in which the INE registered more fixed mortgages in Spain (marginal 10 years ago) than variable ones was March 2020. Now, when the prophecy of rising interest rates has more than fulfilled itself, the former represent seven out of ten operations.
And this has also been the year of subrogations and novations: thousands of mortgagees trying to convert their loans into fixed ones or to improve their conditions. But since October, variable mortgages have gained share again, something that Martín attributes to “the withdrawal of basic financial services or basic mortgage loans by entities.” That is to say, that the banks see too much risk or little business in fixed interest and put it at a price that is not very attractive to consumers.
Some will be able to benefit from the old or the new code of good practices that the Government and the bank agreed to. These will offer more advantageous than market terms to vulnerable borrowers. But consumer associations question the real scope of a measure that, according to the Executive’s calculations, targets a million families. Where there is less hesitation is what can be expected for 2023. Rodríguez, from the CSIC, recalls that “the ECB has said very clearly that it will make additional rate hikes, and the Euribor is incorporating this expectation.” As “the indicators say that inflation is going to stay well into 2024″, he adds,“ the indicator should keep going up”. According to Bankinter’s latest estimate, it will rise to 4% next year. Other analysis houses have not yet advanced their predictions. After all, a year ago it seemed like science fiction to place the Euribor for this December at 1%. And it’s already at 3%.
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