The one-year Euribor, the most used indicator in mortgage loans, closed the week at 1.955% due to the tightening of the monetary policy of the European Central Bank (ECB), which on Thursday raised interest rates to 1.25%, which will make an average mortgage more expensive by 170 euros per month.
One of the main consequences of the ECB’s decision is the greater difficulty that companies and families have in accessing financing and loans, especially mortgages, while savers are rewarded by increasing the profitability of their deposits.
The Euribor is the price at which banks lend money to each other and serves as the main indicator for setting the price of variable-rate mortgages, to which should be added the spread that the bank adds to the loan, and which is usually reviewed annually.
The indicator comes from a time marked by negative interest rates, but it has turned around in recent months due to the ECB’s interest rate hike in its fight against inflation, which in August reached a historic 9.1% in the Eurozone.
The Euribor soared in August with an average rate of 1.249%, a record for the last decade, and the provisional rate for September stands at 1.908, according to market data consulted by Efe. In September of last year it was at -0.492%.
In this way, the variable mortgages that have to be reviewed with the provisional data for September would be more expensive by 171 euros per month in the case of an average mortgage of 150,000 euros, with a maturity of 25 years, and an interest of the Euribor plus 1 %. The monthly fee would go from 532.66 euros to 703.54 euros.
From the Spanish Mortgage Association (AHE) they foresee that these increases could translate into a slowdown in real estate activity and, consequently, in the contracting of mortgages, while experts from the real estate portal Fotocasa anticipate that the Euribor could close the year in the 2% and reach 3% by 2023.
Everything will depend on the evolution of the economy and the next decisions of the ECB, although analysts predict increases in interest rates and that they will close the year at 2%.
From Fotocasa they also highlight how a change of cycle is taking place in mortgage financing, given that 75% of mortgages signed in April were at a fixed rate and were reduced by 5 percentage points in just two months due to the rise in interest.
For the spokesman for the Pisos.com portal, Ferran Font, in the current balance between fixed-rate and variable-rate mortgages, banks will opt to promote the latter due to this important percentage of mortgages granted at a fixed rate.
Another consequence in the real estate market would be the increase in rents to the detriment of the sale and purchase operations and greater delinquency in payments, says Font.
In a similar line, Singular Bank expresses itself, which foresees a slight increase in delinquencies and concludes that the one-year Euribor will reach 2.5% in the coming months but that, once there, it will stabilize, while the power purchasing power of households will be reduced, as well as consumption and business profits.
However, they point out that the aggregate impact will be much less than in the previous crisis, when the Euribor reached an interest of 5.5%, and due to the preference in recent times for fixed-rate mortgages.
Experts recall that the mortgage should not account for more than 35% of the salary and from HelpMyCash, Olivia Feldman recommends that people who want to access a mortgage now “it is best to hire a fixed one” because they can still sign “below of 3%”, although before the rise in rates and the increase in the Euribor, fixed mortgages could be obtained at an interest of 1%.
On the other hand, Fieldman reminds savers as the winners after the rise in interest rates since it improves the profitability of deposits and “there are already 2% APR interest at one year”.