The index hits its highest level since 2009 in September, anticipating further rate hikes to fight inflation
The Euribor has crept into the lives of the Spaniards almost silently in just a few weeks at a rate not achieved in over 13 years. The indicator closed September at an average of 2.23%. The last time it touched this amount, in January 2009, Spain began to see the beginning of the great financial crisis, which would last for several years. In August, it closed at 1.2%, nearly doubling the benchmark in just one month. And at the beginning of the year it was negative, at -0.5%.
Now a new crisis, stemming from rampant inflation that is hitting all of Europe, is once again pushing interest rates up. With this reference, those who have to review their mortgages this month will notice a significant impact on their wallets. For a home loan of around 150,000 euros over 24 years and a difference of one point on the Euribor, you will therefore pay around 745 euros per month from now on. That same mortgage would have paid 550 euros per month in the past year. That is, you should assume an increase of about 200 euros, which equates to about 2,400 euros per year.
Despite these general calculations, financial institutions remind that not all households are affected in the same way by this increase in the Euribor. Firstly, because a large part of the floating rate loans was contracted more than ten years ago, when spreads were lower than current ones and even reached offers of just 0.25 points plus the Euribor. In addition, they emphasize that a large proportion of those households with variable loans have reduced their mortgage debt in recent years.
A recent study by Idealista concluded that those who took out a variable mortgage in August 2021 will face an increase in the monthly amount of 118 euros (1,421 euros per year), which is reduced to 104 euros per month (1,245 euros per month). years). ) when entering into it in 2018 and only 44 euros per month (528 per year) in case he had entered into it in 2005.
This difference is explained by the fact that during the early years of the loan’s term, most of the installment is devoted to the payment of interest and the remainder to the payment of principal. But as time goes on, these factors are reversed until practically only the principal has been paid at the end of the loan. This is why the impact of the Euribor increase for a recently concluded mortgage will not be the same as for, for example, a mortgage that was taken out more than 15 years ago.
The horizon of higher interest rate hikes has clearly led consumers to bet on fixed-rate mortgages, which already represent 75.4% of total new loans, the highest percentage of the whole series historically. The average rate in this reference was 2.6% in July, compared to the 2% recorded at the start of the variable loan. And the outlook for the second half of the year seems clear to experts: a slowdown in the growth rate and prevalence of fixed interest rates, although their price will continue to rise.
The Euribor continues to anticipate the interest rate policy of the European Central Bank (ECB), which already raised the official price of money to 0.5% in July; and in September it did another 0.75 basis points, to 1.25%. Current price developments may force the institution to raise rates again to the likely 2% environment at the June meeting to contain the escalations that have led to a harmonized inflation rate of 10% in the eurozone as a whole.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
