The race downhill of the index that is used to calculate the interest rate of variable mortgages seems to have no end. It started early last summer and hasn’t stopped yet, but experts predict it’s about to. It was in June when the Euribor embarked on the downward path that, from -0.081% registered the previous month (its peak since December 2016), has led it to close this month at -0.504%, its sixth consecutive historical minimum, to Missing Friday data. The continuity that the European Central Bank wants to ensure in the coming months to the policies to stimulate the economy will be reflected in the stagnation of the Euribor at its current values. Meanwhile, the effect of its collapse is noticeable: on the one hand, mortgage loans with variable interest rates become significantly cheaper, and, on the other, the downward pressure that the Euribor indirectly exerts on the price of fixed interest continues. .
In this way, if the new variable mortgages become increasingly attractive, the discount that those who review their old loan this month will experience in their installment will be especially good. For a 30-year mortgage of 300,000 euros with an interest rate of Euribor plus a differential of 0.99% (one of the most common), the savings this year will be 373.92 euros or, what is the same, 31.16 euros per month, since the fee will go from 929.60 euros to the current 898.44 euros, according to calculations by the banking comparator iAhorro. This is so because the index stands this January 2.5 tenths of a point below the level at which it was a year ago (-0.253%).
Very low fixed rates
In this context, to weather the reduction in the profit margins of this product, banks will continue to bet on the fixed rate —which guarantees them higher income— through very attractive offers. For this reason, the director of Mortgages at iAhorro, Simone Colombelli, is convinced that now “there is a great opportunity to take out a fixed mortgage and take advantage of unusually low interest rates forever.” On the contrary, in his words, variable mortgages are undoubtedly “an interesting product”, but more so “for a profile that is not very risk averse and wants to repay their loan in 10 or 15 years, at most”, and thus avoid the effects of a possible long-term rise in the Euribor.
From the comparator they also predict the consolidation of subrogation operations, that is, the transfer of the mortgage from one entity to another, in exchange for more favorable conditions for the user. “Bearing in mind how the recent evolution of the Euribor has affected mortgage interest rates, we are faced with a wide spectrum of improvement options,” underlines Colombelli, who notes: “In times of greatest economic difficulty, users look for all the ways to increase their savings, so it is not surprising that they also try it through their mortgage”.
stimulus policies
But, how long can it take for the Euribor to approach again that positive terrain that it abandoned almost five years ago? “Years”, they comment from the sector. At the moment, the index has moderated its decline and in January it fell only 0.7 basis points compared to December (-0.497%). “Its floor is -0.50%”, says Joaquín Robles, an analyst at the financial broker XTB. As the Euribor is the interest rate at which European banks lend money to each other, it would not make sense for them to do so at a price higher than the one charged by the ECB to store excess liquidity in their coffers, that is, that 0 .50%, since the guarantees offered by the supervisor are unbeatable.
Therefore, Robles rules out that the Euribor could go down further, although he does not see a consistent rise in the short term either. Rather, the index would move steadily for the next few months around the threshold reached in January, until there is any relevant change in Frankfurt policy. “This trend is going to continue, because the ECB will continue to inject liquidity into banks until at least June 2022, at much more advantageous rates than interest and deposit rates,” Robles reiterates.
The ECB, without news
It is true that the governor of the central bank of the Netherlands, Klaas Knot, in an interview with Bloomberg this Wednesday said that the ECB “still has room to cut rates” and bring interest rates to -0.10% or the rate deposit at -0.60%, for example. In this case, the Euribor is likely to find a new low at -0.60%. However, “this is not going to happen”, according to Robles. “Last week, after the supervisor’s meeting, Christine Lagarde [presidenta del BCE] She said that she was going to continue monitoring the situation, that she was worried about the third wave of the pandemic, that she was going to continue to maintain the debt purchase programs if possible, and that she is doing everything in her power. She can not do more ”, underlines this analyst.
For this reason, in his opinion “the banks are going to continue with the current excess of liquidity, and the economy, waiting for that rebound that is being discounted so much in the equity market. There is already talk of the second half of 2021, due to the delay in the vaccine and the third wave of infections, so there will be no news in the Euribor for the remainder of the year.”