If the last rise in interest rates by the European Central Bank (ECB) by 75 basis points has been historic, so is the rise in the Euribor and the rise faced by variable-rate mortgages in September. The index to which almost 80% of mortgages in Spain are referenced, some 4.1 million, advances at an unprecedented speed and already marks 2.156% in daily rate, levels not seen since the end of 2011. The monthly average has climbed to the edge of 2% compared to 1.249% in August, the month in which it also smashed records. Experts believe that from now on the increases will not be so abrupt and the 12-month Euribor will end the year at around 2.5%. But they warn that the scenario is very uncertain and that everything will depend on how much the official ECB rates rise in its fight against runaway inflation, which in August reached a historic 9.1% in the euro zone.
Bearing in mind that the Euribor has broken all forecasts throughout the year and that many updates fall short in a matter of days, analysts take care of their health and stress how difficult it is to make predictions three months ahead. It should be remembered that the indicator reached -0.5% in the first days of January and changed the trend by surprise in February.
“The Euribor will continue to be conditioned by expectations of rate hikes, so the following inflation data will be decisive,” says Joaquín Robles, from XTB, who estimates that the Euribor may reach 2.25% in the coming weeks. Singular Bank predicts that it will stand at 2.5% in the following months and, once there, it will stabilize. The financial portal HelpMyCash forecasts that it will exceed 2.5% in December.
The ECB acknowledges that it will increase rates again at the October and December meetings to try to bring inflation back to around 2%. The market consensus discounts that the guiding rates end the year between 2% and 2.25% from the current 1.25%. Enrique Lluva, deputy director of fixed income at Imantia Capital, considers that “the risk map has changed a lot since the last ECB meeting”. He believes that the rate hikes will stop at 2.5%, although he does not rule out that they will go to 3%. In this context, he sees the Euribor in the range of 2.30% -2.50% and “with an upward risk during 2023”. In Fotocasa and Asufin they see it at 3% next year.
The average mortgagee faces an increase in installments of more than 2,000 euros per year
For his part, Fernando Romero, an analyst at Ábaco Capital, expects a slowdown in the price of the Euribor despite the fact that in the short term inflation expectations continue to be high. “Before the end of the year, the 12-month Euribor is likely to slow down the strong increase experienced so far in 2022.” And he adds that a temporary cessation in the Ukraine war could even lead to a reduction.
A year ago, the value of the Euribor was -0.492%. This means that citizens with variable mortgages who have a revision this month will have their interest raised by 2.5% at once. In the case of an average loan of 150,000 euros with a maturity of 25 years and a differential of 1% on the Euribor, the installments will become more expensive by about 179 euros per month or 2,150 euros per year.
In Abaco Capital they believe that a cessation of the war could cause a reduction
From the Spanish Mortgage Association (AHE) they predict that these substantial increases could translate into a slowdown in real estate activity and, consequently, in the contracting of mortgages, which according to the latest data from the National Institute of Statistics (INE) corresponding to June still they are increasing at a rate of 12% per year, with 56,700 new signatures on housing.
Banking sources point out that the six years that the Euribor has been negative have been an “anomaly” and the current levels of the Euribor can be considered normal. In fact, the historical average of the Euribor is 1.841%.
Online simulator. The Bank of Spain warns variable mortgage clients of the importance of knowing the loan review date, which is usually annual. To calculate how much the installments will rise based on the Euribor, you have an online simulator on your customer portal. It is necessary to enter the initial capital, the interest rate (the differential contracted plus the Euribor) and the amortization period. Thus, the amount that will have to be paid until the next review is obtained. At Singular Bank they assure that the aggregate impact on pockets will be less than in the previous crisis, when the Euribor reached an interest of 5.5%, and due to the preference in recent times for fixed-rate mortgages.
Offer. The rise in the Euribor not only affects those who already have a mortgage, but also those who want to hire one. Almost all entities are raising the fixed interest rates they offer, which generally exceed 2.5% APR, and are lowering both the initial rates and the spreads they apply to variable-rate mortgages.