The Euribor closes this Friday, November 8, 2024 at 2.534%consolidating a week of reductions. The main rate to which variable mortgage loans are indexed continues to show declines and consolidates a first week of November with a provisional monthly average of 2.617%lower than last month’s closing, where it was 2.697%.
This figure represents the lowest level of the interbank index in more than two years. In November 2022, Euribor recorded a rate of 2.828%above the provisional average recorded this month.
The news comes just after learning yesterday of the new interest rate cut by the US Federal Reserve (Fed), which followed market forecasts and reduced the official rate by a quarter of a point. Even if the Fed’s decisions are independent of those of the European Central Bank (ECB), what happens across the Atlantic can also have consequences in Europe.
How does this impact my mortgage?
This downward trend experienced by the Euribor directly affects mortgage reviewsboth half-yearly and twelve-monthly. Banks recalculate variable mortgage interest with a 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 2.697%, the mortgage payment of owners who have a revision in November will drop to 644.16 euroswhich means that They will pay 109.27 euros less than a year ago. Over the next twelve months, this will mean a saving of 1,311.24 euros.
What will happen until the end of the year?
The recent meeting of the European Central Bank (ECB) lowered interest rates again by 25 basis points, as expected, with a deposit rate remained at 3.25%. The result of the American elections does not seem to imply, a priori, a change in the road map. This is good news for mortgage holders, as it appears that the Euribor trendwhich directly depends on prices, will decrease over the rest of the year.
The market, experts and Euribor itself are convinced that rate cuts will not stop in the coming months and could even become more aggressive. All analysts clearly see that Frankfurt consecutive cuts every six weeks.
Analyst and market forecasts so far agree to emphasize end of 2025 because the moment when the Euribor falls will stop. Initially, it is expected that the index reaches 2% and remains even below, up to around 1.75%. THE Euribor Futures Contracts three months, the main forecasting measure in the index market, indicates 1.97% for December 2025according to Bloomberg.
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 twelve months.
