The year of the pandemic will have been that of records for the Euribor. If the index to which the overwhelming majority of mortgages at variable interest rates in Spain are referenced closed January at -0.253%, this month – in the absence of the data corresponding to the last three days of 2020 – we see it fall to -0.496 %, its fifth consecutive historical low, and more than 2.3 tenths of a point below the value it held a year ago, making loans that have their annual review cheaper now. In between, a steep climb in the early stages of the pandemic, and then a long plummet afterward. Experts now foresee a stabilization and a rise in the Euribor – and with it, an increase in the cost of mortgages – as the economic outlook improves. But the mortgaged should not worry excessively: the rise of the index towards positive values will be very gradual, according to all the sources consulted.
“The evolution of the Euribor during the year has been aligned with movements and decisions on interest rates of the European Central Bank (ECB) ”, explains Darío García, analyst at the financial broker XTB. This index is defined as the interest rate at which some European financial institutions that are part of a panel lend money to each other. Thus, initially, distrust of the possible increase in the delinquency rate as a result of the pandemic and the corresponding weakening of the Old Continent’s banking system caused the Euribor to rebound, reaching -0.081% in May, a level not seen since December 2016.
The ECB is key
The -0.5% soil is a threshold that experts consider natural. Its about type of deposit that the ECB applies to banks when they keep money in the coffers of Frankfurt, instead of making that liquidity available to households and companies through loans. In this way, it would be contrary to logic for entities to prefer to pay more to lend money to each other than to deliver this surplus to the ECB, an institution that offers them the maximum possible guarantees.
However, some days this month the unthinkable happened, and the Euribor traded slightly below that -0.5%. “We did not expect it,” admits García, who, anyway, predicts “a slow recovery” for the index. “We can say that the Euribor has bottomed out and that from now on we are not going to witness such abrupt falls as in recent months, but that the index will stabilize throughout 2021 without leaving negative territory,” says Colombelli, in the same line. From Bankinter they estimate a Euribor that is around -0.45% in 2021, and -0.42%, in 2022.
The key is what the ECB does. “The improvement in the prospects for the recovery of the real economy and the consequent hypothetical rise in interest rates at that time will cause a rise in the Euribor price”, predicts García. “Even so, it will take many years and less intervention from Frankfurt in the economy to see this index in positive, so the increase in prices will be a sine qua non,” he adds.
More fixed mortgages
“A great indicator to know what are the expectations of banks regarding the Euribor” is, for two years, the “development of aggressive campaigns to offer mortgages at fixed interest rates”, that is, those loans that do not depend on the ups and downs of this index, in the words of this financial analyst. “If those who charge interest bet more on fixed-rate mortgages than those referenced to the Euribor, it is precisely because they do not expect to do business with it, at least in the coming years,” he says.
The fixed rate has been synonymous with guarantee and security for the bank, which has pushed this product with offers never seen before. “At this juncture, if there is any change next year, it will be in the fixed rate and by entities that are less competitive and want to improve it,” says Colombelli. In this sense, the director of Mortgages at iAhorro believes that the average fixed interest rate on mortgage loans will increasingly approach 1% and we will see how the proportion of fixed mortgage firms, which in October was 48.9% according to the INE, it will exceed the variables.
– .
