Average mortgage interest rates rose to 1.98% in July

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This is the highest level since June 2019. The Euribor expects a new interest rate hike and the average for August is already above 1.1%

The rise in mortgage payments in the heat of the rise in the Euribor accelerated particularly in July. The average rate at which Spanish entities provided loans for the purchase of houses was 1.986%, the highest level since June 2019 when it exceeded 2%.

The figure has risen for five consecutive months, according to data from the Bank of Spain published this Friday in the Official Gazette (BOE). And it implies a remarkable increase from the 1.799% recorded in June. A year ago, the average rate was 1.485%.

The 12-month Euribor gains started to accelerate in late February, as the market began to anticipate the first interest rate hikes by central banks, given evidence that inflation was not as temporary as expected, let alone after the outbreak of the crisis. war in Ukraine.

The indicator referred to most of the variable mortgages in Spain has been increasing almost continuously since the second month of the year. It was in April when it released the negative interest rate it had maintained since 2016. And in mid-June, it crossed 1% of its daily rate for the first time in a decade. The average for that month was 0.852%. And in July it rose again to 0.992%.

Although the month of August started with more moderate prices, with a daily rate of about 0.92%, the indicator has already had 12 sessions of more than 1% in the daily rate and on Thursday it marked a new high in 10 years by reaching 1.258 %, above 1.229% from the previous day. The monthly average until August 19 – only eight business sessions are still missing – is therefore already above 1%.

This trend in the Euribor, accelerated by the expectation that the ECB will continue to raise interest rates at its next meetings to cope with runaway inflation of 9.8% in the eurozone, has completely changed the strategy of banks , making their fixed-rate loans less attractive (making interest rates more expensive) to divert new customers to Euribor-pegged mortgages.

In particular, those who review their mortgage annually in July (taking into account an average loan of 137,900 euros over 24 years with Euribor interest plus one point), will see their rate rise by more than 93 euros per month. That is just over 1,100 euros per year.

Source: La Verdad

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