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Is your credit reviewed in October? Get ready. Increase in installment can reach 45%

Euribor rates rose sharply in September and will heavily penalize those whose mortgage loans are reviewed next month. See the simulations

October should be a month of positive surprises for the pocket of most Portuguese people. Most will receive 125 euros in state support to face the consequences of inflation. Those who have children under the age of 24 will receive 50 euros for each child. And pensioners will receive a bonus equivalent to 50% of their pension.

But in October there are other surprises to consider financially. And these are not positive at all. For many, the price of gas and electricity will rise. And the Portuguese with mortgage loans who have their contracts reviewed next month will have the heaviest of unpleasant surprises: their installment with the house will increase a lot.

This happens because the review of the contracts of those who have housing credit is based on the average of the previous month of the respective Euribor rate that it uses as an index. And in September, both the three-month Euribor, the six or 12-month Euribor all had the same behavior: they increased a lot. This is, in fact, the first time that the effect of euribor rates with positive values ​​will be felt. This leads to increases in the installment payable in October that can exceed 200 euros.

But the bad news does not end there, as these values ​​are expected to continue to increase in the coming months. This is because Euribor rates are closely linked to changes in interest rates made by the European Central Bank and, this Wednesday, the body supervised by Christine Lagarde indicated a new increase for October that could even reach 0.75 points.

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Increases from 95 to 200 euros

Contracts indexed to the six-month Euribor, which constitute the largest share of the stock of housing loans in Portugal, will feel the effect of the rate in positive territory for the first time, where it has remained since 6 June. And this is already the second review this year.

This means that, for a loan of 150 thousand euros over 30 years, with a spread of 1%, and using the average Euribor rate for September, the monthly installment will reach 600.51 euros, 146.44 euros more than paid since the credit was last reviewed. Corresponds to an increase of 32%.

The six-month Euribor average rose from 0.466% in July to 0.837% in August and, in September, it is at 1.596% %. The six-month Euribor was negative for six years and seven months (between November 6, 2015 and June 3, 2022).

installment in october

150 thousand euros, 30 years, spread 1%

Euribor 6 months

is paying

454,07

Go pay

600,51

Increase

146,44

A greater increase will be felt by those who have contracts indexed to the 12-month Euribor and who will experience the rise in interest rates for the first time in 2022. Since the contract is reviewed from year to year, its holder will have to pay plus 201.72 euros in the installment of the house, when you have to deliver the 651.16 euros to the bank. During the last 12 months I paid 449.44 euros. Corresponds to an increase of 45%.

After having soared on April 12 to 0.005%, for the first time positive since February 5, 2016, the 12-month Euribor is above 0% since April 21. Its average also advanced from 0.992% in July to 1.249% in August. And in September the average is already at 2.33%.

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installment in october

150 thousand euros, 30 years, spread 1%

Euribor 12 months

is paying

449,44

Go pay

651,16

Increase

201,72

On the other hand, in contracts indexed to the three-month Euribor, the effect will be smaller, but approaching one hundred euros. The installment will rise to €561.96, an increase of more than €95 since July. The rise corresponds to an increase of 21%.

It is the third upward revision of this type of contract this year, in April they were paid another six euros and in July another 17 euros.

The three-month Euribor rate was negative between April 21, 2015 and July 13, 2015 (seven years and two months). The three-month Euribor average rose from 0.037% in July to 0.395% in August, and currently stands at 1.011%.

installment in october

150 thousand euros, 30 years, spread 1%

Euribor 3 months

is paying

466,10

Go pay

561,96

Increase

95,86

Euribor started to rise more significantly since February 4, after the European Central Bank (ECB) admitted that it could raise key interest rates this year due to rising inflation in the eurozone and the trend was reinforced with the beginning of the Russia’s invasion of Ukraine.

Christine Lagarde believes that the ECB should do “everything it can do” to bring “in the medium term inflation back to 2%”, underlined the ECB president at an event in Frankfurt this Wednesday.

According to Lagarde, if the bank does not go ahead with a new rise in interest rates, the consequences for the economy will be more serious than the increase in the cost of credit. “Our objective is not to reduce growth, our essential objective is to ensure price stability. This is something the ECB has to achieve,” he added.

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