September will be the fifth consecutive month of reductions in the installments of variable rate mortgages that are revised every year (a large part of those contracted in our country). Precisely, the drop in the Euribor represents a saving of 620 euros per year for 100,000 euros of mortgage credit. Almost 52 euros each month.
For a typical loan of 150,000 euros over 25 years, with an interest rate composed of Euribor plus a differential of one percentage point, the reduction is 930 euros per year. 77 euros per monthly payment.
The benchmark index for most mortgages fell to an average of 3.166% in August, the lowest since October 2022. Since the July figure (3.526%), the decline is the largest in 15 years. In August 2023, the Euribor closed at an average of 4.073%. The decline since then is the largest in 11 years, almost a percentage point at a time. From April to July, the declines had been much more timid.
“We must not forget that the critics [de las hipotecas] “They are made in relation to the data of the same month of the previous year, and the quota for the month of August and, predictably, for the rest of the months from now until December, will be those that will experience the greatest reduction, since the Euribor then exceeded 4%”, explain the experts of Asufin (Association of Financial Users). Those who review their loans every six months will also benefit from a saving of around 28 euros per month.
The mortgage index has experienced a historic rise from the 0% at which it was trading in 2022 due to the increases in official interest rates that the European Central Bank (ECB) began to implement in July of that year to combat inflation. In June 2024, the institution decided to begin to reverse this cycle of monetary austerity after bringing the “price” of the currency in the eurozone back to 4.5%. A first rate cut of 0.25 points (to 4.25%) had already been put forward by the Euribor, as shown in the graph in this information.
At present, the benchmark index of loans, which depends on banks, continues to predict further cuts in interest rates by the ECB. In its daily price, it has already fallen below 3.1%. “With inflation under control [en agosto las subidas de precios se moderaron al 2,2% en el conjunto de la eurozona, cerca del objetivo teórico de los bancos centrales]”The monetary institution is expected to continue to ease its monetary policy in the coming months, which should prolong the positive credit trends,” underlines José Félix Izquierdo, economist at BBVA Research, in a recently published article.
“This decline is good news for the mortgage market, which could start to recover as early as September. [las hipotecas nuevas son más baratas ahora que en los últimos meses] and it is also good news for citizens who have taken out a variable mortgage, who will see how their mortgage payments will decrease in the next review,” says Simone Colombelli, analyst and advisor to the comparator iAhorro.
The trend is relevant because it must be remembered that in our country 70% of mortgages are variable, and the transition to fixed-rate loans has been very complicated in this inflation crisis due to the opacity of the banks and the lack of competition. admitted the Minister of Economy, Carlos Corpo, to (indirectly) the Vice President of the ECB, Luis de Guindos.
The ECB’s monetary austerity has indeed been felt in the pockets of mortgaged families and in the granting of mortgage loans, which have continued to fall sharply month after month since 2023. But this contraction in credit does not mean that there has been no demand for housing. The only demand that has been stifled is that of families on the lowest incomes, often trapped in an equally prohibitive rental market.
In fact, the consequences of the ECB’s strategy to contain inflation remain very significant for mortgaged families. For 100,000 euros of variable rate loan, the increase in cost from 2022 is around 2,000 euros per year despite the latest cuts. According to the latest Family Budget Survey (EPF), with data from 2023, the fifth poorest households in our country devote 41% of their total expenses to housing, including supplies and the calculation of a “rent imputed to the dwelling in which the dwelling resides when it is the owner or has transferred it.
This was essentially the strategy of the central banks: to make financing in general more expensive to stifle the purchasing power of families but also the ability of companies to invest and thus impose a moderation of inflation. This strategy carries the risk of plunging the economy into recession, which has already happened to Germany, while other countries in the eurozone have experienced stagnation. Spain is a positive exception in this context.
This month, the ECB is expected to lower its official interest rates again (its Governing Council meets on September 12), after the first cut in June and their maintenance in July. The main thing is that the Federal Reserve (the Fed, the central bank of the United States) has confirmed that it will also start lowering the “price” of money, as inflation is under control “on a sustainable path to return to 2%.”
