The Euribor, the index to which most variable mortgages are referenced, breaks the 2.6% barrier downwards this Friday, October 25, 2024, when has reached the figure of 2.565%already revealing that, a few days before the end of the month, the reference will close October consolidating the seventh consecutive monthly drop. Furthermore, taking into account the data for the month of October last year, this closure will mean the largest cut in the installments of mortgages called for review since August 2009.
And so far in October, the Euribor has accumulated up to seven days of consecutive falls. Although it rose this Wednesday by 0.052 points, the indicator has experienced a sharp drop this Friday of 0.049 basis points, so the monthly average for October 2024 remains, provisionally, at 2.718%.
In fact, if it closed around this figure and with four days left to confirm the final value, it would represent the largest drop compared to the same month last year. What does this mean? Basically, good news for variable rate mortgage holders who now have their annual reviews, since they will experience the biggest drop of the year which will translate into the largest drop in mortgage payments since 2009.
In the month of October 2023, the Euribor closed at 4.16%, the highest value of the last bullish cycle, while in 2024, if it finally closes around 2.7%, the index would discount the seventh and largest fall annually so far in 2024, a total of 1.46 basis points compared to last year and 0.236 points less compared to the previous month.
How does it affect my mortgage?
This downward trend that the Euribor is experiencing directly affects mortgage reviewsboth semiannual and 12 months, since banks recalculate variable mortgages with the monthly average, rising or falling compared to the data from six or twelve months ago.
To see it with an example, for a mortgage of 140,000 euros for 30 years (360 months), with a differential of 1% and taking the month of October 2023 as a reference (since most mortgages are reviewed at 12 months) , when the Euribor closed at 4.16%, The monthly fee was 765.30 euros.
Now, with the provisional average for October 2024, which stands at 2.718%, the mortgage payment of homeowners who have a review in September will drop to 614.82 euroswhich means that They will pay 150.48 euros less than a year ago and the first drops in the monthly payments of those mortgaged will begin to be noticed.
What will happen to the Euribor until the end of the year?
The recent meeting of the European Central Bank (ECB) lowered interest rates again by 25 basis points, as planned, with the deposit rate remaining at 3.25%. This is good news for mortgage holders, since it seems that the trend of the Euribor, which depends directly on rates, will continue the downward trend for the remainder of the year.
In fact, the market, experts and the Euribor itself are convinced that the rate declines will not stop in the coming months. At least until summer, It is clear that the ECB will cut per meetingalthough it is also true that they already glimpse the end of the falls.
Thus, the big question about when the index will stop falling has its answer at the end of 2025when several analysts and the market agree on the date set to put an end to the continued declines, which will take the figure to 2% at the end of next year, even pushing a little further below this barrier, to a figure around at 1.75%. Three-month futures, the most followed by investors and analysts, are above 1.9% in December 2025 contracts.
How is the Euribor calculated?
The Euribor responds to the name European InterBank Offered Rate and is calculated through a panel of European banks that report every day at what rate interbank loans are made. As of 2020, calculations are carried out in a hybrid manner. The panel data is included, but also the market’s own estimates, with the aim of reducing volatility and the risk of manipulation, to which these indices were subjected at the beginning of the century.
The panel is made up of 18 European banksamong which are Santander, BBVA, Barclays, Deutsche Bank or Unicredit.
Every business day at eleven in the morning, the average interest rate at which financial institutions lend capital to each other is published. one week, one month, three months, six months and 12 months.
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