The daily price of the 12-month Euribor is accelerating its progress in the last days of the month and, with a session still to end in August, points to an average of 1.225%, which will leave the largest year-on-year increase since 2000. Those who review their variable-rate mortgage with the Euribor data for August will suffer an increase in their monthly payment of about 120 euros on average.
The index has climbed this Tuesday to 1.758%, maximum since January 2012 and accentuates its rise from 1.482% in which it closed on Friday, also in record territory for a decade. The increase in the last two sessions is due to the general rise in debt yields, after the Fed and the ECB have shown these days their firm will to combat inflation with further increases in interest rates, even at the cost of sacrificing growth.
That was the message launched by Jerome Powell, chairman of the Fed, at the central bank symposium held in Jackson Hole, seconded by the ECB. In the European Central Bank, the debate on a possible rate hike of 75 basis points at the next meeting on September 8 has also arisen in recent days, as demanded by the hard wing of the Governing Council of the institution.
The rise in the Euribor is therefore a reflection of the abrupt movement in the bond market, which has been adjusted these days to a scenario in which rate hikes, far from softening, may intensify and in which the price of money will be high for a time, more than expected so far by investors until the goal of regaining price stability is achieved.
For an average mortgage of 150,000 euros, for a term of 25 years and with Euribor interest plus a differential of 90 basis points, the monthly installment will go from 525.5 euros to 644.9 euros per month after the update with the Euribor rate for the month of August. That is to say, 119.45 euros more each month and an additional expense for the domestic economy of 1,433 euros during the next twelve months.
The rebound in the Euribor has abruptly broken the calm that reigned in the annual reviews of variable-rate mortgages, after a long time of reference rates in the euro zone at zero and with hardly any changes in the index. Thus, the interest rate for the aforementioned mortgage goes from 0.4% last year -thanks to a Euribor that in August 2021 was aligned with -0.5% of the deposit facility- to 2.125%, at add the 0.9% differential to the monthly rate for August.
The increase in the year-on-year comparison of the monthly average of the Euribor is going to be 1,723 points, an intensity that has not been registered since 2000. The increase in prices is close to the record registered during that year, which left year-on-year increases in the average of the index mortgage higher than 2 points.
The expectation for the coming months is that the Euribor continues to advance, which points to the upward revision in the installments of the more than 4 million variable-rate mortgages that exist in Spain. The Euribor will rise in parallel to the new increases in the price of money that the ECB could decide. In fact, September will not be the last and the market is already flatly discounting two successive rises in interest rates in the euro zone of half a point in September and October, without ruling out an increase of 75 basis points in the next meeting on September 8. In iAhorro they calculate that the Euribor could end this year around 1.9%, although the speed of its rise is making most forecasts expire.
Variable-rate mortgages began to become more expensive in their annual review, although by the minimum, in January of this year after years of zero variations in the Euribor and even declines. The perspective then was already of a gradual return to normality in the ECB’s monetary policy, which has accelerated, however, with the war in Ukraine and runaway inflation.
Fixed-rate mortgages are now the guarantee of stability in installments and, despite the fact that their price is much higher than a year ago, they continue to be the majority in the new concession, 73% of the total, according to the latest data from the INE of June.
In addition, of the more than 14,400 mortgages that changed their conditions in June, 22.6% was due to changes in interest rates. If before the change, 23% of them were at fixed interest, after the change in rates, that percentage rose to 49.9%
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