It is not a great relief for those with mortgages who are suffering from the recent rises in interest rates, but it is a small reprieve. He 12 month Euriborthe index used as a reference in most variable rate mortgage loans in Spain, will be at an average of 4.071%its first fall in 20 months, since since January 2022 it has not stopped rising.
With one day to go until the end of the eighth month, this level will be below the monthly rate registered in July of 4.149%, which was its highest level since 2008. However, it will remain elevated compared to August 2022, when The index stood at 1.249%.
All in all, this small respite will mean that a person who has contracted a variable mortgage of 150,000 euros for 30 years and with a differential of 0.99% plus Euribor and must review their interest rate in the month of August, will register an increase of his mortgage payment of about 238 euros per month, compared to the rise of 265 euros that was registered in July. In this way, your mortgage payment would go from about 572 euros to about 810 euros per month in August.
This slight decrease compared to July is based on the expectation of the markets that the European Central Bank (ECB) is nearing the end of its aggressive cycle of rate increases (425 basis points of tightening from the summer of 2022) regardless of whether it decides to decree a final increase of 25 basis points at its September meeting.
HelpMyCash’s mortgage specialist, Miquel Riera, notes that the slight drop in August reflects that entities are applying lower interest rates on their interbank loans because they anticipate that the ECB will stop raising its rates in the medium term. “In other words, they adapt their prices to the pause they expect to take place within the next 12 months,” he adds.
However, the mortgage director of the comparator iAhorro, Simone Colombelli, is cautious, as he recalls that August is, historically, a month of declines because everything is paralyzed. “Most likely, we will see more rises in the Euribor as of September. I would not say that what we are seeing is a downward trend as such, but rather a small seasonality in the data,” says the expert, according to Europe Press.
In this way, the comparator indicates that in August the Euribor tends to decrease or to register minimal increases or decreases that are not “significant” for the market. Thus, Colombelli recalls that during last year 2022, in August the index stood at 1.249%, only two and a half tenths above the July figure (0.992%), “which may seem like a good increase, but when compared With such a drastic increase registered in September, of almost one percentage point, up to 2,233%, it could be said that it was minimal”.
Likewise, iAhorro points to the fact that interest rates have exceeded the Euribor in the last two months, something that has not happened since the indicator became negative and rates at 0%. Colombelli explains that this is because the increase agreed by the ECB in July was only 25 basis points. “When we enter an environment of smaller increases, the push to the Euribor is less,” he says.
In addition, he points out that if the aforementioned new rise occurs in September, it does not mean that something similar will occur every month: “At the end of 2023 and the beginning of 2024 we will not see continuous rate increases, but rather, from time to time , in order to lower inflation (which in some EU countries is more controlled and in others less), the ECB will decide to increase them, maintain them, and perhaps even decrease them,” he says.
In iAhorro they do not foresee “big changes” in the last quarter of 2023, in such a way that the Euribor will continue “more or less” as before, with slight ups and downs. For 2024, iAhorro also foresees a difficult year, although a transition towards a decline at the end of next year and the beginning of 2025.
At HelpMyCash, they believe that the ECB will likely apply a new rate hike in September or October in order to contain inflation, so the Euribor could continue to rise slightly in the coming months and will stabilize at around 4% and 4.5% before the end of the year; below, however, the interest rate applied by the ECB.
However, from the comparator they do not rule out that the ECB may now pause the rate hikes, as predicted by various players in the financial market. However, for that to happen, HelpMyCash believes that two conditions should be met: that inflation in the euro area falls at a faster rate than expected in August or September and that the continent’s economy is on the verge of recession in the third quarter. .
