Euribor, the index to which most variable mortgages are referenced, presents this Monday November 11, 2024 a new annual minimum, which is in line with the ECB’s rate cuts and consolidates the current downward trend, good news for mortgage holders, since the data remains below the barrier of 2.6, marking a daily data of 2.528%.
In fact, to find similar data you have to go back to October 2022, where it fell to 2.5%, just before starting the bullish streak that ended up reaching all-time highs until a year later, when this sequence has ended. with a maximum peak of 4.16% in October 2023.
Now the panorama is completely different. The European Central Bank (ECB) appears to continue its rate cuts until the end of the year, reducing by meeting, along with futures. They predict reductions until the end of 2025when Euribor reaches 2%.
In the current downward trend, Euribor managed to consolidate its seventh consecutive monthly decline in October, with a final average of 2.691%, which means the largest drop for mortgage repayments awaiting review (12 months), with 1,469 basis points compared to October 2023 and a total decrease of 0.245 points compared to the previous month.
With the daily data for November, the Euribor seems to follow this same dynamic, since the current the provisional average with the first 11 days of the month is 2.592%. If this continues, the Euribor would mark the eighth consecutive month of decline, which directly influences the installments to be paid by variable rate mortgages.
What will happen to Euribor until the end of the year?
To put the current evolution of the Euribor in context and predict what will happen until the end of the year with futures contracts, we must take into account the latest movements of the European Central Bank (ECB). , which further lowered interest rates by 25 bases. points, with a deposit rate remaining at 3.25%.
This is good news for mortgage creditors, since it seems that the evolution of Euribor, which directly depends on rates, will continue to decline for the rest of the year. In fact, the market, experts and Euribor itself are convinced that the fall in rates will not stop in the coming months. At least until the summer, it is clear that the ECB will make reductions per meeting, although it is also true that it already sees the end of the cuts.
Concretely, the end of cutting ranges around December 2025, when Euribor is expected to reach its lowest level, falling. This downtrend may seem a bit counterintuitive, however, given the latest updated data on mortgage index futures.
What happened? Although at the beginning of October three-month Euribor futures forecast a figure below 2% in December 2025, this figure increased after the close of October, since it currently stands at 2.1%.
How does this impact my mortgage?
This downward trend experienced by the Euribor directly affects mortgage reviewsboth semi-annual and 12-month, since banks recalculate variable mortgages with the monthly average, up or down compared to data from six or twelve months ago.
To see it with an example, for a property loan of 140,000 euros over 30 years (360 months), with a differential of 1% and taking the month of November 2023 as a reference (since most property loans are reviewed for 12 month), when the Euribor closed at 4.022%, The monthly fee was 753.43 euros.
From now on, with the provisional average for November 2024, which amounts to 2.592%, the mortgage payment of owners who have a revision in September will drop to 606.26which means that They will pay 147.17 euros less than a year ago and the first reductions in monthly mortgage payments will begin to be felt.
How is Euribor calculated?
Euribor is called the European InterBank Offered Rate and is calculated by a panel of European banks which report every day at what rate interbank loans are granted. Since 2020, calculations have been carried out in a hybrid manner. Panel data is included, but also the market’s own estimates, with the aim of reducing volatility and manipulation risks, to which these indices were subjected at the beginning of the century.
The panel is made up 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 is published. one week, one month, three months, six months and 12 months.
