The 12-month Euribor continues to rise relentlessly. The provisional monthly average of the reference indicator for most mortgages in Spain reached 0.85% in June, which translates into the highest level since August 2012.
In just half a year, the Euribor has gone from touching record lows, standing at around -0.5%, to hitting highs in the last 10 years. And the market takes for granted that the upward trend has only just begun and that the ‘rally’ will go further, as the European Central Bank (ECB) raises interest rates. The first increase in the price of money since 2011 will take place in July, with 25 basic points, and there will be another in September, although at the moment the intensity is unknown.
Given the imminent rise in interest rates, the reference indicator for three out of four loans for home purchase in Spain has marked up to 10 daily data in June above 1%which had not happened for more than a decade, although the monthly average will finally be below said psychological barrier.
Even so, those who have to review the conditions of their mortgage in the coming weeks will suffer a strong rise in monthly fees, which will exceed 1,000 euros per year, as recently warned in a study by the Association of Financial Users (Asufin).
Specifically, a 30-year variable mortgage of 150,000 euros and with a differential of Euribor +0.99% will experience an increase in your monthly mortgage of about 90 euros or, what is the same, about 1,083.36 euros per year . If the amount of the loan were 300,000 euros, with the same conditions, the cost of the installment would be 180.55 euros per month and more than 2,100 euros per year.
And the bad news for mortgage holders is that the market assumes that the 12-month Euribor will continue to rise sharply in the coming months. In fact, Bankinter’s analysis department warns that the indicator will be around 1.9% at the end of the yearwhich would mean returning to 2011 levels, and which will be around 2.2% in 2023, which represents a strong upward revision with respect to the numbers that it handled just three months ago, when I saw the indicator around 0.4 % this year and close to 0.8% in 2023. However, he believes that in 2024 there could be a slight drop (until it returns to around 2%).
As he warns Manuel Romera, Director of the Financial Sector at IE Business School“the fee will go up a lot more than people want to think in the next five years. If the medium-term Euribor is around 3%, mortgage payments can rise by 50%”.
For his part, the Bank of Spain has warned that the rise in interest rates will cause economic problems for more than a million families, who will be forced to spend more than 40% of their income on mortgage payments and other loans. And it is not the only organization that has launched this type of notice.
The Spanish Mortgage Association (AHE) also believe that the rise in rates could weigh down the ability to pay the mortgage loans of thousands of households, while the Savings Banks Foundation (Funcas) believes that it is the greatest risk facing the housing market, above potential real estate bubbles.
In this scenario, consumers are betting more and more on fixed mortgages, with contracting at record levels, to eliminate the interest rate risk, as recommended by experts, who urge them to look for an alternative now and get a loan at a competitive price.
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