The euribor gives no respite The hikes in interest rates announced by the European Central Bank (ECB) and the Federal Reserve (Fed) to contain inflation continue to fuel the main reference index for variable mortgages, which are the majority in Spain. Just two days after the close of the month, the Euribor already exceeds daily share 2.6% and it’s about to end September with an average level of 2.2%, almost double that of August, when it reached 1.249%. An increase that will lead to a new increase in mortgage payments, especially those of recently signed loans.
The Futur Finances mortgage portal calculates that for a mortgage with annual review requested last year at thirty with a nominal Euribor rate + 1% and residual debt of 180,000 euros, the monthly payment will go from 539 euros to 770 euros. In other words, an increase of 231 euros per month e € 2,772 more per year.
Although few were those who bet on such a marked rise in the first months of the year, experts already almost assume that the Euribor it will exceed the 3% threshold by the end of the year, which would result in higher commissions on more recent mortgages, as both HelpMyCash and Futur Finances have warned. Alberto Valle, director of FSI at Accuracy, even believes he can surpass that level and be around range between 3% and 3.5%. Valle believes that the ECB “could be forced to follow the Fed’s path and raise rates above 2.5% over the course of 2023 as long as inflation does not approach values close to those of the monetary rate”. A situation that, inevitably, will continue to push the Euribor to higher levels also next year.
The other derivative of this unbridled Euribor escalation will be the downturn in the real estate market already in progress. The shift in monetary policy following inflationary pressures will cause a moderation in the upward housing cycle in 2023, according to the latest “Economic Information Notes” from the Savings Banks Foundation (Funcas).
Experts point out that although the market continues to expand, both in the number of transactions and in prices despite the slowdown in economic activity, it will soon weaken due to the rise in the Euribor.
Funcas Director of Economic Situation Raymond Torres explains that despite the loss of purchasing power generated by inflation, the excess savings accumulated during the pandemic and the relatively favorable evolution of employment continue to drive demand. and the upside Price growth in 2022 could be around 6% on an annual average, higher than that of households’ disposable income.
However, he warns him the market will moderate as financing conditions tighten and the financial effort of families increases, already slightly above the historical average. “Lower demand and higher supply will cause a slowdown, with prices that could evolve in line with household disposable income,” says Torres, who, however, rules out a market collapse or a sharp rise in non-performing loans, as unlike the when the housing bubble burst, the market is not starting now from an overvalued position.