The Euribor closes this Friday, November 8, 2024 in 2.534%consolidating a week of reductions. The main rate to which variable mortgages are indexed continues to show declines and consolidates a first week of November with a provisional monthly average of 2.617%lower than the one that closed last month, when it was 2.697%.
The figure represents the lowest level of the interbank index for more than two years. In November 2022, the Euribor registered a rate of 2.828%above the provisional average that is being recorded this month.
The news comes just after learning yesterday of the new interest rate cut by the US Federal Reserve (Fed), which has followed the markets’ forecast and has reduced the official rate by a quarter of a point. Although the Fed’s decisions are independent of those of the European Central Bank (ECB), what happens on the other side of the Atlantic can also have consequences in Europe.
How does it affect my mortgage?
This downward trend that the Euribor is experiencing directly affects mortgage reviewsboth semiannual and twelve months. Banks recalculate the interest on 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 November 2023 as a reference (since most mortgages are reviewed for 12 months) , when the Euribor closed at 4.022%, The monthly fee was 753.43 euros.
Now, with the provisional average for November 2024, which stands at 2.697%, the mortgage payment of homeowners who have a review in November will drop to 644.16 euroswhich means that They will pay 109.27 euros less than a year ago. Over the next twelve months, it will mean a saving of 1,311.24 euros.
What will happen 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 a deposit rate that remained at 3.25%. The result of the US elections does not seem to imply, a priori, a change in the roadmap. This is good news for mortgage holders, since it seems that the Euribor trendwhich depends directly on the rates, will be decreasing in the remainder of the year.
The market, experts and the Euribor itself are convinced that rate cuts will not stop in the coming months, and may even become more aggressive. All analysts see clearly that Frankfurt will consecutive cuts every six weeks.
The forecasts of analysts and the market have agreed so far in pointing out end of 2025 as the moment when the Euribor declines will stop. Initially, it is expected that the index reaches 2% and even stays below it, up to around 1.75%.
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 twelve months.
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