He 12-month Euribor flirts again with all-time lows. In the absence of a week to the end of the month, the provisional average for August stands at -0.35%, very close to the record that it set just a year ago, when it stood at -0.355%. And taking into account that in the last days has broken the -0.37% level in daily rate, everything indicates that it will register a new low.
The benchmark indicator for most mortgages in Spain accumulates three months of declines, after hitting four-year highs in May, at the height of the covid-19 pandemic on a global scale.
However, and after the announcement by the European Central Bank (ECB) of taking extraordinary measures to face a historic recession in the euro area caused by the coronavirus, the Euribor once again started a downward trend that has led it to once again place itself in zone of historical lows.
The highest monetary and financial authority in the common currency area announced in early June its intention to add 600,000 million euros to the Pandemic Emergency Purchase Program (PEPP) that it approved after the outbreak of covid-19 and that initially had 750,000 million euros. Thus, the total amount rises to 1.35 billion euros. In addition, the body led by Christine Lagarde extended the purchases at least until the end of June 2021 and has committed to continue reinvesting the principal of the securities that expire. On the other hand, it kept interest rates at the minimum of 0.0% where they have been since spring 2016.
Since these measures were known, the 12-month Euribor has been falling continuously and already places its daily rate at around -0.37%.
Santiago Carbó, Director of Financial Studies at Funcas, explains that “the Euribor is at a minimum fundamentally because the ECB has redoubled its monetary facilities and the expectation is that monetary policy will continue to be very accommodative for a long time. What happens to the indicator will depend on how long it takes to see an economic recovery and how accelerated it is. Before 2022 it is difficult that there will be significant increases, but if the recovery accelerates, they could arrive before.
And the good news is that the new Euribor record is coming it will be a relief for the mortgaged, since it will lower the monthly payments of the loans, although it supposes a blow for the bank.
How it holds Juan Villén, head of idealista / mortgages, “Current Euribor levels confirm that, after the brief mirage of rise a few months ago, the growth expectations of the European economy and inflation remain at minimum levels, which together with the immense debt accumulated by the governments, makes rates will return to historic lows, with no forecast of any rebound in the coming months. This is undoubtedly good news for families with a mortgage, although not so much for savers and banks ”.
Since the COVID-19 crisis began, the financial sector has had to make multimillion-dollar provisions to hedge against future defaults, which has caused historic losses for Banco Santander (in the first half it has lost more than 10 billion euros), while it has seen its portfolio of foreclosed assets grow for the first time in seven years. As if that were not enough, experts foresee a lower demand for financing from families and companies in the coming months.
With this stage on the table the financial sector keeps the mortgage war alive that it has issued in recent years and that has been marked by very competitive offers both in terms of variable and fixed mortgages. In addition, the list of entities that are betting on ‘removing’ customers from the competition through mortgage subrogations is growing.
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