The Euribor has lost momentum in July, but not enough to stop advancing. For yet another month, and now there are seven consecutive months, the indicator to which the majority of variable mortgage loans in Spain are referenced has become more expensive. The monthly average closes at 0.992 points, which represents a slight advance compared to 0.852 points in June and is bad news for many borrowers: the average mortgage will become more expensive by about 94 euros in the contracts that are reviewed now.
Since last December, when it was very close to its historical floor (and below the theoretical floor), the Euribor has only grown. That caused him to test positive in April for the first time in six years. The reason that analysts pointed to was inflation and the need for the European Central Bank (ECB) to raise official interest rates for the first time since 2016 to combat it. The euro’s monetary supervisor confirmed in June that it would do so, which caused the largest monthly rise in the Euribor in history. So, despite the fact that the movement was executed in July, and above what was initially expected, in the last month the indicator has only grown by 0.140 points. It is the smallest pull since last March.
However, in the year-on-year comparison the difference continues to widen. In July 2022 the Euribor is 1,483 points more expensive than in July 2021. This is the result of the fact that, although little, it has continued to rise; while last summer it became cheaper. And that step from one year to the next is very relevant for consumers because it is normal for mortgages to update their installments once a year, taking as a reference the current price and that of 12 months before. For those who have to recalculate them with the July data, the rise will be the highest since September 2006.
Starting from an average mortgage in Spain (137,921 euros, according to INE data in 2021), to be returned in 24 years and with a variable interest of the Euribor plus one point, the increase in the following letters will be about 94 euros per month. Or, what is the same, 1128 euros more per year. If until now the letters of a loan with these characteristics involved a monthly disbursement close to 509 euros, in the following twelve monthly installments it would rise to almost 603 euros.
ascending forecast
The Euribor, in fact, is the rate at which a group of banks in the eurozone lend money to each other. Its importance for the Spanish mortgage system lies in the fact that the majority of variable loans condition their price on the interest of this indicator at 12 months. And that is why it anticipates the expected movements in the official price of money set by the ECB. This tries to balance economic growth and inflation with its monetary policy. But with prices skyrocketing in the eurozone, most analysts believe the euro regulator will have no choice but to raise official rates again. In fact, it was already announced that it would do so in September. The question that remains is how much.
Given this scenario, and until the financial entities consider that the monetary policy is going to stabilize, the bet of the majority of research services is that the indicator continues to rise. Funcas believes that it will close the year at 1.4%, while BBVA raises that forecast to around 1.5%. But there are also more pessimistic forecasts: Bankinter estimates that by the end of 2022 it will be at 1.9%. If these predictions come true, the difference in the year-on-year rate will not stop widening, leading most borrowers to face the highest rise in mortgage prices since the bubble years at the beginning of the century, something that has already begun to happen in July. To avoid this, many homebuyers have recently turned massively to fixed rates, which has led to a historic turnaround in the market. But until relatively recently, variable loans dominated the market and continue to represent the majority of live mortgages in Spain.