Euribor declines continue for fourth consecutive day, along with mortgage index This September 25, 2024, it stands at 2.776%leaving behind the 3% barrier at which it had established itself in recent days and even falling from the 2.8% it marked this Tuesday. The financial markets have also recovered, anticipating further declines in the medium term. For December 2025, futures anticipate a Euribor at 1.8%.
Euribor futures have been reluctant to price in the latest aggressive declines in the medium-term index. This week, they are starting to react to the recent declines that have them trading below 3%. Three-month futures for December have been withdrawn this week this level and this Wednesday they rise to 2.91%. Euribor did it two weeks ago, but investors didn’t really believe the latest declines and didn’t cover their positions. The entire futures curve has moved and by the end of 2025, they expect Euribor to be around 1.8%. Until recently, it was between 2% and 2.5%. December 2025 futures haven’t been this low since August 2022, right at the start of the ECB’s rate hike cycle.
Euribor futures are derivative financial instruments that allow investors and companies to protect themselves against changes in interest rates. Euribor is the average interest rate at which major banks in the eurozone lend money in the short term.. Banks then pass the cost of the loans, in the form of interest, on to their customers. Therefore, forward contracts make life easier to reduce credit risk.
A futures contract is based on the price that investors expect it to have at a certain future date. For Euribor, the most common is linked to the three-month Euribor and analysts and investors generally use it as a reliable indicator of the trajectory that the twelve-month Euribor, to which mortgages are referenced, will take. When a company or investor buys a Euribor future, it does not directly acquire the index, but rather the right to exchange the index at the price set on the contract’s expiration date.. It is therefore a good indicator to try to predict the Euribor in the medium term.
Euribor and the roadrunner
The problem is that at present, the Euribor is too high for analysts who follow the financial markets and the financial markets themselves. The index is already below the forecasts of most analysis houses that had been made before the summer. For experts, the Euribor would end 2024 at 3%. But the speed with which the reductions are being made suggests that the mortgage reference will remain below this level. Funcasone of the most prestigious think tanks in the country, is preparing a panel of experts that includes the country’s economic forecasts, and by extension some financial variables such as the Euribor, and places it at 2.83%. And analysts of Interbank They believe that the year will end 2.75%.
The monthly average of the index gradually moved away from 3% in September, so that the very end of the month will be below this value, which This had not happened since November 2022 and represents the sixth consecutive month of decline. And this will make the experts’ predictions almost obsolete.
Since the beginning of September, the mortgage index has shown a downward dynamic that has led to establishing daily data that represent annual minimums, as is the case with today’s data, with a decrease of 0.082 points. Therefore, The provisional average for this month of September has already fallen to 2.965%.
The sharp cuts in the Euribor, which are very good news for holders of variable rate mortgages who need to review their repayment terms in order to be able to pay quickly, are motivated by expectations of rate cuts by central banks.
In fact, the ECB and the Fed cut rates this month. The European bank did so first. Lagarde, the president of the organization, announced a new rate cut to 3.5% from 3.75%, after the one in June. Second, the last Fed meeting ended on Wednesday this week with a 50 basis point cut (the equivalent of two “simple” 25 basis point cuts). And the best part is that for the next meetings, financial markets are anticipating intense rate cuts that could accelerate the decline of the Euribor.
For the Federal Reserve meeting on November 7, a new 50 basis point cut is already on the table. In the case of the ECB, which is even more influential in the evolution of the Euribor, a move of similar magnitude to that of the Fed is already beginning to take shape for the meeting on December 12. The markets are discounting two in a row by 25 basis points.
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 757.81 euros.
Now, with the provisional average for September 2024, which currently stands at 2.965%, the mortgage payment for owners who have a review in September will drop to 633.55 euros, which means that They will pay 124.26 euros less than a year ago and the first reductions in mortgage payments will begin to be felt.
