The euribor, the index to which most mortgages are referenced, has reacted to the last meeting of the European Central Bank (ECB) scoring strong increases. He anticipates that the agency will raise rates by half a point in September, which will be added to the quarter point already confirmed for July.
Specifically, the Euribor has registered a valuation of almost 20 percent in two days, which has led it to break the 0.60 percent barrier in a daily rate consecutively.
On Thursday, the day of the meeting, it stood at 0.61 percent, and on Friday, when it was confirmed that the ECB would raise rates in July, it rose 10 percent to 0.68 percent.
The monthly average it is also revised upwards and so far in June it is already at 0.537 percent.
Simone Colombelli, director of mortgages at iAhorro, explains that “the rise in the Euribor at the end of last week is conditioned by the ECB’s decision to raise rates.”
The indicator of variable mortgages is very sensitive to this type of decision and in this case, “the rise in rates was going to be more gasoline for the Euribor.”
The ECB confirmed the rate hike and spoke of half a point in September
And it is that the ECB surprised the market at its June meeting by being very explicit regarding the roadmap that will be followed in monetary policy regarding the evolution of the price of money.
In that sense, he not only confirmed that the price of money will rise by a quarter in July (which will be the first increase in 11 years), but also anticipated another increase in September.
In that sense, the body responsible for the ECB’s monetary policy spoke openly of the possibility that the body would rise half a point in September if the inflation forecasts they handled for 2024 remained above 2.1 percent.
Precisely the fact that the ECB president, Christine Lagarde, left the door open to a rise of half a point in September is what makes the Euribor break the 0.60 percent barrier.
“As the weeks progress, the Euribor will continue to rise to stand in September closer to 0.75 percent, than 0.50 percent,” explains Joaquín Robles, XTB analyst.
In the forecasts communicated last Thursday, this is how the body contemplated it, which was forced to worsen the previous calculations made in March by two tenths.
The Euribor will close the year at 1.5 percent
With everything, the euribor is beating all forecasts. If the Euribor historically does not usually move more than half a point between the highest and lowest value in 12 months, this year not only has it already done so, but it is on the way to having a difference of 100 basis points.
Specific, The Euribor closed June 2021 at -0.484 percent, which represents a difference of 102 percentage points.
Given this escalation, analysts who saw that the Euribor could climb to 1.3 percent, recognize that the rate decision makes them calculate even more upward estimates for this year.
“Before the ECB’s decision, our statistical estimate said that we could end the year close to 1.3 percent. With the latest rises in recent days, the data has changed and today we would be closer to closing the year at 1.5 percent”.
For Robles, the pace of the evolution of the Euribor is going to be set by the central banks, especially after knowing the inflation figure for the United States, which rose despite the fact that the estimates predicted that it would moderate one tenth.
At the beginning of the year, Bankinter analysts estimated that the Euribor would close December at 0.80 percent.
Rising cost of mortgages
From closing at 0.537 percent, variable-rate mortgage loans that are revised with the June data will become more expensive between 800 and 1,600 euros per yeardepending on the amount.
Thus, for a mortgage of 150,000 euros, the fee will skyrocket by almost 70 euros per month, which represents an annual increase of 840 euros.
For a mortgage loan of 300,000 euros and a differential on the Euribor of 1 percent, the cost will be almost 140 euros more per month, which makes a total balance of 1,600 euros.
The rise in the Euribor could pose a problem for family finances, which are already being hit by the endless escalation of inflation and the end of the savings achieved after the pandemic.
In this regard, the economy minister, Nadia Calviño, argued that the rise in the Euribor would have a limited impact because it starts from historically low levels, due to the high degree of fixed-rate mortgages for new production and because the level of effort is also at historically low levels.
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