2023-10-27 07:16:42
Indebted families and companies are waiting like May rain for the moment when the installments they pay for their loans stop rising. However, the long-awaited event will still be delayed for several months. Those who have to review their mortgage payment with the October Euribor face increases that can reach 17%. Or what is the same, 131 euros more payment per month for an average mortgage at a variable rate (150,000 euros to be paid in 25 years with a differential over the Euribor of 0.99 points and an annual review).
The one-year Euribor – the indicator with which the fee paid by most variable loans in Spain is calculated – stands at 4.175% on average so far this month. And although it may not move much further above these values, everything indicates that it will not go down in the short term either.
Barring catastrophe, loans reviewed during the remainder of the year are exposed to increases in the installment that could reach up to 10% in the coming months. Of course, as time passes without the Euribor increasing, the quota increases will become increasingly lighter until there will come a time when they stop occurring. A point that, judging by the forecasts of analysts such as Funcas or Bankinter, will probably be in the middle of next year.
The pause in interest rate increases that the European Central Bank (ECB) decreed on Thursday can be understood as a turning point in the frenetic escalation that the central bank has carried out in the last 14 months. The Euribor dances to the rhythm set by the European Central Bank (ECB): when the ECB’s official rates rise, it follows and vice versa. But everything indicates that the orchestra led by Christine Lagarde has no intention of changing the score.
On Thursday, the president of the ECB made it very clear. Lowering interest rates is still not even on the minds of central bankers in Frankfurt. Asked if the meetings discussed when the first cuts would arrive, Lagarde responded: “It was not discussed at all and the debate would be absolutely premature. Even having a discussion about the cut is totally, totally premature.” In fact, the president of the ECB left the door open to a new rise at the next meeting in December. “Just because you maintain doesn’t mean you’ll never get back up,” she clarified.
Now that we seem to have reached the top of the mountain, the focus of the debate is on how long we will stay there. For now the ECB is giving few clues, but the markets are betting that the first drops will arrive in the middle of next year.
However, it is still early to draw conclusions. The coming months will be key to anticipating how the ECB will move. Central bankers now have six weeks until their next meeting in which they will have to analyze a series of data that will condition their decisions.
One of them is the GDP for the third quarter in the eurozone, which will be known in two weeks. The euro economies have been practically stagnant for three quarters, with hardly any growth, and the latest indicators that arrive are not very encouraging. If the eurozone contracts in the third quarter and the framework changes from stagnation to technical recession, central bankers will have a hard time looking the other way. Although its only mandate is price control.
Furthermore, central bankers will sit down at the table again in December, already knowing the inflation data for October and November. If inflation continues on its downward path as in the ECB’s script, the most likely scenario is a new pause. The key at this point is oil prices, which are driving economists around the world upside down.
Geopolitical instability, with an uncertain war between Israel and Hamas in Gaza, has brought volatility to the market. If crude oil prices shoot up and settle at high levels, inflation will rise again, further delaying the return to the 2% objective pursued by the ECB. At that point, governors would have to face a painful dilemma. If they fear that prices will get out of control, they will be tempted to raise rates even further for fear of losing credibility. But raising rates further in an anemic economy like Europe’s could end up turning a situation of stagnation into one of recession.
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