The Euribor, the index to which most variable mortgages are referenced, presents this Monday, November 11, 2024 a new annual minimum, which agrees with the rate reductions by the ECB and consolidates the current bearish streak, good news for mortgage holders, since the data remains below the 2.6 barrier, marking a daily data of 2.528%.
In fact, to find similar data you have to go back to October 2022, when it fell to 2.5%, just before beginning the bullish streak that ended up setting historical highs until a year later, when this streak ended. with the maximum peak of 4.16% in the month of October 2023.
Now, the panorama is completely different. The European Central Bank (ECB) appears to continue with rate cuts until the end of the year, cutting per meeting, at the same time as futures They foresee decreases until the end of 2025when the Euribor will touch 2%.
In the current bearish streak, the Euribor managed to consolidate the seventh consecutive month-on-month drop in October, with a final average of 2.691%, which meant the largest drop for mortgage payments pending review (12 months), with 1,469 basis points compared to the month of October 2023 and a total of 0.245 points decrease compared to the previous month.
With the daily data for November, the Euribor seems to follow this same dynamic, since the current provisional average with the first 11 days of the month is 2.592%. If this continues, the Euribor would mark the eighth consecutive month of falls, something that directly influences the installments to be paid by those mortgaged at a variable rate.
What will happen to the Euribor until the end of the year?
To put the current evolution of the Euribor in context and predict what will happen until the end of the year with the futures, we must take into account the latest movements of the European Central Bank (ECB), which lowered interest rates again in 25 basis points, with a deposit rate that remained 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 to decline in 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 the summer, it is clear that the ECB will cut per meeting, although it is also true that they already see an end to the falls.
Specifically, the end of the cuts ranges around December 2025, when the Euribor is expected to bottom out, downward. This bearish trend, however, may seem a bit counterintuitive considering the latest updated mortgage index futures data.
What has happened? Although at the beginning of October the three-month Euribor futures predicted a figure below 2% in December 2025, this figure has increased after the close of October, since it currently stands at 2.1%.
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 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 2.592%, the mortgage payment of homeowners who have a review in September will drop to 606.26which means that They will pay 147.17 euros less than a year ago and the first drops in the monthly payments of those mortgaged will begin to be noticed.
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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