The tougher-than-expected speech of the European Central Bank (ECB) yesterday, announcing that it will continue to increase interest rates “significantly” after applying a new rise of 50 basis points, has triggered the euribor. The mortgage index par excellence, which had almost come to a standstill pending the decision of the monetary authority, rises today at a daily rate of 126 thousandths, from 2.867% to 2.993%, and is already close to the 3% threshold. The provisional average for December marks 2.869%, well above the negative value close to the minimum of -0.502% just a year ago, which will again make the variable rate mortgages that have to be updated more expensive.
In an average loan of 150,000 euros over 25 years with a differential of 1% over the Euribor, the monthly payment will go from 531 euros to 780 euros, which means 249 euros more per month and about 3,000 euros more per year. If the amount is 180,000 euros, the bill to pay will go from 638 euros per month to 937 euros, with an increase of 299 euros per month and 3,588 euros per year.
“The Euribor has risen very quickly and its equilibrium level for the coming months it will depend on the level of arrival of the type of intervention by the ECB, which was very belligerent with inflation and points to new increases in the next meetings. However, if energy prices do not skyrocket again as they did in the summer, we could see inflation contain faster than the ECB forecast, and this would relax the need for monetary tightening,” says Santiago Martínez, head of economic analysis of Ibercaja.
Yesterday, the ECB raised official rates by 50 basis points, to 2.5%. Although the rate of increase is softer than in the two previous meetings, when the increase was 75 basis points, due to the moderation of inflation, the institution insisted on the message that it will continue to fight against inflationary pressures. “Keep raising rates, because by any metric inflation is too high and will not slow down without action from central banks; the mistaken idea of transitoriness has been abandoned a long time ago,” says Ignasi Viladesau, investment director at MyInvestor, which adds that “it executes the increase at a slower pace to show that they have already executed the fastest rate increase in the history of the ECB, that monetary policy takes time to take effect and that there is a certain risk of recession”.
For Alberto Valle, director at Accuracy, “both the Fed and the ECB have made it clear that there will be more increases and that they can go back to 75 basis points, if required.” For Generali Investments, “the ECB is not aggressive, but is committed to the long term with future increases of 50 basis points.” Thus, the consensus, which had predicted that the official rates would reach a maximum of 3%, is now adjusting its forecasts and is already targeting 3.5%.
Likewise, the market predicted that, after the key meeting of the ECB on Thursday, the Euribor could reach 3% before closing the year. With two weeks to go before the end of 2022, the 12-month index -which represents the interest on interbank loans- is at the gates of a psychological level that it has not exceeded since January 2, 2009. For its part, the futures of the 3-month Euribor have reacted strongly and set maximums in September 2023 at 3.21% to moderate in December to 3.14%.
From Accuracy they see the Euribor at around 3.25% in the coming months. “It will most likely touch 3.5% at the end of June,” says Olivia Feldman, co-founder of the financial comparator HelpMyCash.com, who assures that “the monetary authority has a complicated role. It must seek the balance between reducing inflation and avoiding putting countries that are most indebted are in trouble, so we insist that we think it will be prudent and raise policy rates by about an additional point over the next 12 months.”
For his part, Rafael Moral, head of Hipoo’s mortgage analysis department, anticipates that “the ECB will not continue to raise interest rates so ostensibly” and believes that “the Euribor is not expected to rise very high, it will be progressive”. From UCI they point out that “the evolution of the Euribor will begin to adjust once it touches the 3% barrier, as long as inflation remains controlled.”
#Euribor #shoots #rise #rates #close