The Bank of Spain confirmed that the 12-month Euribor rose 0.287% in May, after leaving negative ground for the first time in more than six years in April. With reference to this index the price of convertible mortgage will increase,
Euribor, anchored in negative territory since 2016 by the European Central Bank’s (ECB) over-expansion policy to cushion the recovery in the euro area, continues its climb following a change in the European body’s discourse, which will soon see interest in the euro area. Will raise rates to deal with rising inflation.
The ECB’s president, Christine Lagarde, recently revealed that the entity’s governing council meeting, scheduled for next July, would be the right time to raise interest rates for the first time in more than a decade in the euro area.
Lagarde pointed out that, based on the current outlook, the agency is likely to be in a position to leave negative interest rates behind by the end of the third quarter.
Because of this normalization of monetary policy euribor to queue Strong growth since the start of the year, closing December 2021 with a monthly rate of -0.502% to mark a positive value of 0.013% in the previous April. The average for May stood at 0.287%, representing an increase of 27 basis points and 76 basis points over the month, compared to -0.481% registered a year ago.
An increase in Euribor would mean that Euribor 20-year mortgage of 150,000 Euro with +1% spread which is subject to revision, will experience an increase in the monthly fee of EUR 51 per month or, which is equal, of 613 Euro per year,
The Bank of Spain also published that the one-year interbank rate Mibor, which served as the official mortgage market reference for operations conducted before 1 January 2000, also closed at 0.287% in April.
For the new official interest rates to be published now, one-week Euribor was at -0.568%, one-month -0.546%, three-month -0.386% and six-month -0.144%.
In June, the Bank of Spain also began publishing the short-term interest rate (€STR) on money, a new reference index defined by observers as the value on the last trading day of the month for Target 2. Average compound interest rate on different terms (one week, one month, three months, six months and 12 months) which is prepared and disseminated by the European Central Bank (ECB).
The reference interest rate based on €STR in one week was -0.586%, one month -0.585%, three months -0.582%, six months -0.579% and one year -0.573%.
Expert Forecast for Euribor
Obviously, variable rate mortgage price increases will continue to increase hand in hand with future growth in Euribor.
analysis department bankinter guess that euribor would stop December of 2022 at 0.4% and December 2023 at 0.8%, while analysts on caxabank Indicate that the index can be reached 1% next year,
director of mortgages iahoroSimone Colombelli, points out that the year 2022 could almost end with an Euribor 1,35%, “These calculations are only a mathematical estimate, but, if they are met, we will end the year with figures for 2012, when Spain was still coming out of the 2008 economic crisis,” he explained.
Despite the increase in mortgage payments, iAhorro experts point out that people who had a variable-rate mortgage have benefited from a very low Euribor for a full year, returning to its most normal territory.
“What he has experienced in 2021 is an extraordinary situation. They have enjoyed good conditions for 12 months, but what they are experiencing now is not even disastrous: if they continue an interest rate that is around 1%it is It’s still much better than it was years ago», Colombelli analyzed.
Fixed-rate mortgages increase
In any case, More than half of the mortgages that have been signed in recent years have done so at a fixed rate., which should reduce the effect of Euribor fluctuations. In fact, figures released last week by the National Institute of Statistics (INE) show that 72.7% of mortgages on houses formed in March were signed at a fixed rate, And only 27.3% at a variable rate, so that’s three consecutive months of being chained in which fixed-rate mortgages exceed 70%.
In this scenario, financial institutions are re-adjusting their portfolio of mortgage products, which in recent years focused on offering the best fixed-rate mortgage offer. Thus, banks are betting on bridging the gap to convertible mortgages and making fixed rates more expensive.
“With the rise in Euribor, financial institutions are going to start establishing themselves in a pre-Covid-19 environment. Gradually, they are keeping their offer of fixed rates at around 2%, a figure that was very common in 2017 or 2018, but is almost double what we saw in 2021,” said iHorro’s director of mortgages. Said, he who highlights You Can Still Find “Good Sub-2%” Fixed Rate Mortgages,
On the same lines, HelpMyCash assures that, with a fixed-rate mortgage, the customer will earn with peace of mind and freedom in the face of volatility of indicators, announcements on the edge Central banks and other conditions that affect the market. Furthermore, he points out that there are still people who are offering fixed mortgages at 2% or less, which is “still a good business.”
in his Best fixed rate mortgage rankings May, HelpMyCash highlights the fixed mortgages of Evo Banco (1.94% APR), Targobank (1.67% APR), Ibercaza (2.21% APR), OpenBank (2.37% APR) and Santander (2.36% APR). These rates only apply to customers who meet certain requirements to receive the bonus.
For this reason, HelpMyCash analysts assure that converting a fixed mortgage to a variable one in this time of economic uncertainty is “a mistake”, and is only convenient for customers who request very short-term mortgages or who Know they can cancel it. Soon.
,A convertible mortgage makes sense only and exclusively for the type of person with substantial purchasing power. Enough to charge high fees that allow you to pay off the loan as quickly as possible. Only in this way will you be able to mitigate the impact of future increases in Euribor on your monthly payments, as you will have already paid a good portion of your outstanding money,” he explains.
HelpMyCash experts encourage users who still have enough time to pay off their debt in full to convert to a convertible mortgage to a fixed rate, despite the fact that with the new fixed installments they may be more than that. would pay what they were doing with its variables. The rate, as a result of the fact that banks are increasing the former interest in order to encourage the contracting of mortgages at a variable rate, with which they will earn more than before the increase in Euribor.
Bank of Spain confirms Euribor up 0.287%