He mortgage market It has significant weight in Spain. In 2024 the number of mortgages is around 5.7 millionaccording to the Funcas analysis center. This means that there are several million people for whom the euribor This is of great importance; especially for those who have a mortgage with variable type and those looking for a loan for buy a house.
THE variants inside euribor are a reflection of economic health and monetary policies in Europe. In general, a High Euribor generally reflects a more restrictive monetary policy aimed at controlling the inflation slow down the growth of credit and the request. While a Low Euribor indicates expansive policies aimed at stimulating economic growth by encouraging credit and investment.
However, it should be clear that Euribor does not only react to monetary policy, although ECB policy This is a determining factor in its evolution.
If you are not very clear about the concepts, keep reading because in this article we explain what is euribor And how to calculateas well as his impact on mortgages and in the real estate market.
What is Euribor?
THE definition It’s simple: the Euribor is the index which reflects the average interest rate at which European banks lend money to each other. In other words, it is a key benchmark in the European financial system because establishes the cost of money between banks.
The Euribor was created in 2000with the arrival of the euro, to facilitate a common reference for loans in euros between banking entities. This index replaced the Miborthe previous reference in Spain.
What is the impact of Euribor on real estate credit?
But How exactly does Euribor influence mortgage lending? As we have seen, this index serves as a reference for the interest rate on variable rate home loans. In other words, when the bank lends money in the form of a mortgage, the interest to be paid is marked by the Euribor. Although there are different types of mortgages (one fixed, mixed or variable rate), we now focus on the variables.
Borrowers who choose this type of financing will see how their monthly fees are adjusted according to Euribor fluctuations. The mechanism is as follows:
When a client requests a variable rate mortgage loan, the interest that will be applied is composed of the Euribor plus a differential established by the bank. This differential can sometimes be subsidized if certain services offered by the bank are contracted.
If the Euribor increases, the monthly payment that the borrower must pay also increases. Conversely, if the Euribor falls, the commission is reduced.
For example, if a mortgage loan has a 12-month Euribor of 0.5% and a spread of 1%, the total interest that will be applied will be 1.5%. If the Euribor increases during the next adjustment, the person concerned will be faced with an increase in their monthly payments, thus increasing their financial burden.
This system allows borrowers to benefit from periods of low interestbut it also carries the risk of seeing monthly payments increase in the event of an increase in Euribor. For this reason, it is essential that mortgage lenders follow the evolution of Euribor and understand its influence on the total cost of their loan.
In April 2021, the fixed rate mortgages They reached a significant percentage of 75.3% of total new mortgages. However, in 2023 things started to change and a more noticeable balance between fixed and variable mortgages began to occur, after years in which fixed mortgages clearly dominated the market.
At the end of 2023, with the stabilization and even a slight drop in the Euribor, the variable mortgages They began to regain some popularity. In fact, in 2023, 69% of those who applied for a mortgage opted for the fixed modality, but in 2024 this percentage fell to 56%.
At the same time, the preference for mixed mortgages increases from 8% to 19% and variables remain at 15% of interest, according to report data ‘Profile of the Spanish mortgaged person in 2024’ published by Fotocasa.
How is Euribor calculated?
He Euribor calculation process It is essential to ensure that the index accurately and fairly reflects the cost of money between banks. THE methodology used to calculate the Euribor is hybrid forks supervised by the European Money Markets Institute (EMMI). This body ensures that the published index is representative of real interest rates on the interbank market.
The data is obtained using the main banking entities in the euro zonewhich indicate the interest rates at which they are willing to lend each other money.
He The Euribor calculation is carried out daily and follows a careful process comprising several key steps that enable the construction of a reliable index.
1.Data collection and filtering: Every day, banks communicate the interest rates applied to their interbank transactions in euros, which makes it possible to know the cost of money in the euro zone. To avoid any manipulation of the index and guarantee that only the most representative values are taken into account, filters are applied. The highest 15% of scores and the lowest 15% of scores are excluded from the final evaluation.
2.Calculation of the average: once the data is filtered, the arithmetic average is calculated, which gives the value of the Euribor for the different maturities available.
Types of Euribor according to their terms
Euribor is calculated for different maturitiesmaking it versatile for different financial products. That is to say, each type of Euribor has specific characteristics and is used in different situations, particularly in the mortgage field.
The most common are:
- Euribor at 1 week: Used for very short-term loans and reflects the interest rate at which banks lend each other money for a week.
- Euribor 1 month: designates loan operations lasting one month. This is less common in mortgages, but can be useful for some financial products.
- Euribor at 3 months: It is one of the most used in financial products and also in variable rate mortgage loans.
- Euribor at 6 months: Similar to 3 months, this is a popular option for mortgages and other loans. Its less volatile average makes it a sought-after reference.
- Euribor 12 months: It is the most used since it is adjusted once a year to market conditions. This allows interest to be set in a more predictable manner.
Impact of Euribor on home purchases
The behavior of the Euribor can greatly influence ability of buyers to access a home. In an environment where Euribor is low, mortgage loans become more affordable. In other words, a low Euribor can stimulate demand in the real estate market, causing real estate prices to increase.
On the other hand, a high Euribor can deter buyers because it increases the cost of mortgages, thus affecting their total spending capacity. This effect can be particularly notable in the first months following a rise in Euribor, when many families are forced to reconsider their purchasing plans.
