The 12 month Euribor It is about to end its most extraordinary year, in which it has taken an upward trip of more than 330 basis points on the aggressive rise in interest rates to tame inflation. Although the mortgage index par excellence has moderated its advance in recent days over 2.8%, the market discounts that it will close 2022 at 3% tenth above or tenth below and it will be at that level, which it has not visited since January 1 2009, when it finally puts the brakes on and stabilizes.
The key is in the next meeting of the European Central Bank (ECB) on December 15, in which the increase in the price of money could relax after two consecutive rises of 75 basis points. According to Bloomberg, the possibility of a rise of 50 basis points is now gaining ground, given that inflation in the eurozone gave its first signs of moderation in November, falling for the first time in 17 months and the threat of economic recession worsens. The ECB itself does not rule out a “technical recession” in 2023.
Among analysts, there are opinions for all tastes. Investment firm Edmond de Rothschild AM believes that “economic data reinforces the idea of a slower rise in rates.” At A&G Banca Privada they comment that “although it is very likely that the ECB will reduce the rate of increases and increase rates by 0.50%, it will have to continue restricting its monetary policy to control inflation.” For her part, Audrey Bismuth, from La Française AM doubts that a single piece of data will lead the ECB to stop its monetary tightening and, despite this encouraging sign, does not rule out a rise of 75 basis points.María Marcos, an analyst at Monex Europe, points out that the ECB has clearly expressed its intention to raise the deposit rate to 2%, but wonders if it is feasible to raise it to 3% and maintain it in 2023. In his opinion, it will depend on whether the contraction in growth is faster than expected and whether inflation remains unusually high.
Meanwhile, experts estimate that the Euribor will stand at 3% or very close to that percentage before the end of the year. From there, Funcas expects it to rise slightly to 3.1% throughout 2023 and then start to drop. Likewise, José Manuel Amor, managing partner of Afi, predicts a maximum level of 3.1% in the first months of next year. “It is consistent with an expectation of a rise in the deposit facility to 3% during the first quarter of 2023, a long stop at this level and a start of rate cuts in the second quarter of 2024,” he indicates.
Fernando Romero, from Abaco Capital, maintains that, after the spectacular rise this year, the Euribor will slow down its climb and will peak in the first half of next year, while XTB analyst Joaquín Robles does not rule out that “it could come close to to 3.5% in the following six months.
The Association of Financial Users (Asufin) sees the Euribor at a “figure close to 3%” at the end of 2022. At Bankinter they place it at 2.8%, but they predict that it will reach 3% in 2023 and fall to 2. 1% in 2024. For Caixabank analysts, the 12-month Euribor will seal December with an average of 2.56%, while in December 2023 it will reach 2.73% and by the end of 2024 it will stand at 2.51 %. BBVA predicts that the Euribor will continue to rise and stabilize around 3% at the beginning of 2023, some 350 basis points more than at the beginning of 2022.
The CEO of Ibercaja, Víctor Iglesias, recently said at a financial event that he expects the Euribor to be between 2.5% and 3% in the coming months, taking into account that the war in Ukraine is resolved in 2023, that rates in the United States reach a ceiling of around 4.5% or 5% and provided that European fiscal policy is not expansive and there are no excessive second-round effects.
For his part, Carlos López, from Euribor.com.es, a website that monitors the index daily, believes that December is going to be a key month for the Euribor, which “most likely” will exceed the psychological level of 3%. Given that just a year ago the Euribor stood at an average of -0.502%, those who have to review their mortgage will do so on historically low values and will attend a record increase in the financial cost. For an average amount of 143,000 euros and a 24-year term with a differential of 1% over the Euribor, the fee will stop at 527 euros to 762 euros, which means 235 euros more per month or 2,820 euros more per year.
“Many mortgagees are not aware of the rise that awaits them in the next review, they should do the numbers as soon as possible and be prepared for the biggest increase they have ever seen in their monthly payment, which in some cases will be more than 45%,” he says. Lopez.
The Euribor started 2022 negative at around -0.4%, but inflationary pressures, which worsened with Russia’s invasion of Ukraine in February, changed the ECB’s discourse and also the course of the index, which turned positive in April for the first time in more than six years and has continued to climb in the face of the forceful rise in interest rates by the ECB.
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