Euribor, the index to which most variable rate mortgages are referenced, This Friday, September 13, 2024, it stands at 2.948% in its daily pricewhich means that after the meeting of the European Central Bank that took place this Thursday, it increased slightly compared to the previous days, during which it had chained seven consecutive days of declines, reaching the 3% barrier.
Since then, the index has recorded sharp declines due to high expectations that central banks would make significant rate cuts. In fact, this Thursday, the ECB meeting made a new rate cut of 25 basis points. This is the second reduction so far this year. The previous one took place in June and now another reduction has been executed that reduces the deposit rate from 3.75 to 3.5%.
Since the end of August, the Euribor had already started to integrate the new declines. The index closed at 3.166% and recording the largest monthly decline since 2009since July, closed at 3.526%, a decrease of 0.36 percentage points. Thus, September began on a similar note, with hopes that the reductions will continue.
In addition to today’s decline, the market is anticipating Two new cuts from the ECB to leave the deposit rate at 3% in December. There are only two meetings left. The market is more aggressive towards the Federal Reserve and is predicting five cuts in the three remaining meetings of the year. In the United States, the market is predicting rates to fall from 5.5% to 4.25%.
The data from this Friday, in the 2,948% in daily rate, represents a rebound compared to previous days, with a slight increase of 0.019 percentage points regarding Thursday. In any case, the figure of less than 3% continues to consolidate, a value that is also anticipated by the Euribor futures contracts, one of the indicators most used by analysts, for the end of the year.
How is Euribor calculated?
The Euribor is called the European InterBank Offered Rate and is calculated by a panel of European banks that report daily at what rate interbank loans are granted. Since 2020, the calculations have been carried out in a hybrid manner. Panel data are included, but also the market’s own estimates, in order to reduce volatility and the risks of manipulation, to which these indices were subjected at the beginning of the century.
The panel is composed of 18 European banksincluding Santander, BBVA, Barclays, Deutsche Bank and Unicredit.
Every working day at eleven o’clock in the morning, the average interest rate at which financial institutions lend capital to each other is published. one week, one month, three months, six months and 12 months.
How does this impact my mortgage?
This downward trend that the Euribor is experiencing directly affects mortgage revisionsboth half-yearly and 12-monthly, as banks recalculate variable mortgages with the monthly average, up or down from data from six or twelve months ago.
To see it with an example, for a mortgage of 140,000 euros over 30 years (360 months), with a differential of 1% and taking the month of September 2023 as a reference (since most mortgages are revised at 12 months), when the Euribor closed at 4.149%, The monthly fee was 764.35 euros.
Now, with the provisional average for September 2024, which currently stands at 3.015%, homeowners’ mortgage repayments which will be examined in September will fall to 636.91, which means that They will pay 127.44 euros less than a year ago and the first reductions in mortgage payments will begin to be felt.
