After having exceeded the psychological barrier of 2.7% at the end of last week, the Euribor, the index to which most variable real estate loans are referenced, has increased again this year. Monday October 7, 2024, again at 2.712%breaking the streak of three consecutive days of decline.
Indeed, the month of September marked the sixth consecutive month of closing down, with a figure below 3%, which had not been seen since November 2022. In addition, last month’s close marked a minimum which had not been given since December 2022. It was therefore a joy for those mortgaged who had to review their payment in September, with a final close at 2.936%.
Stabilization in recent days
As for the last few days, the most notable declines in recent weeks began last Thursday, when the index fell more precipitously, discounting 0.033 points compared to Wednesday. However, the annual minimum of the index was recorded in the latest data, that of Friday October 4, where it fell by another 0.024 basis points compared to the previous day.
With these declines, the index broke the psychological barrier of 2.7 to the downside, settling at 2.688%, but This Monday, it rebounded by a total of 0.024 basis pointsreturning above the aforementioned barrier and confirming a stabilization of the index, which has remained at these values around 2.7 since the beginning of October, with a provisional monthly average of 2.721%.
What is happening with Euribor?
Since the beginning of September, the reference index for real estate loans has recorded falling data, continuing declines which already predicted a close below 3%which has not happened since November 2022 and represents the sixth consecutive month of decline. Now, with the start of October, the Euribor maintains a stabilizing trend which we will have to see if it continues throughout the month.
In fact, faced with this situation, financial markets are already predicting a collapse of Euribor, bring the mortgage rate below 2% in 2025. Concretely, and despite the fact that in recent weeks experts have been reluctant to take into account the latest aggressive declines in the index in the medium term, futures anticipate a Euribor of 1.8% by the end of the year next.
Expert predictions have become obsolete. Currently, the Euribor has taken a downward trend, so much so that analysts who follow the financial markets and the markets themselves They do not keep pace with the mortgage index. In fact, Euribor is already below forecasts made before the summer.
Experts predicted that Euribor would end 2024 at 3%, but the speed at which cuts are accelerating suggests that the mortgage benchmark will remain below this level. Funcas, one of the most prestigious think tanks in the country, prepares a panel of experts that includes the country’s economic forecasts, and by extension certain financial variables like Euribor, and places it in the 2.83%. At the same time, Bankinter analysts believe that the year will end a 2.75%.
Why has it fallen so much?
The pronounced reductions in Euribor, which are very good news for holders of variable rate mortgages who must review their due date in order to pay quickly, are driven by expectations of rate cuts by central banks.
In fact, both the ECB and the Fed lowered rates this month. The European bank did it first. Lagarde, president of the organization, announced a new reduction to bring rates from 3.75% to 3.5%, after that made in June. Second, the latest Fed meeting ended Wednesday this week with a 50 basis point cut (the equivalent of two “single” 25 basis point cuts). And the best of all is that for the next meetings, Financial markets factor in intense rate cuts this may accelerate the fall in the Euribor.
For the Federal Reserve meeting next November 7 Another 50 basis point cut is already on the table. In the case of the ECB, even more influential in the evolution of the Euribor, a movement of similar magnitude to that of the Fed is already beginning to take hold. for the December 12 meeting. The markets discount two in a row by 25 basis points.
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 real estate loan of 140,000 euros over 30 years (360 months), with a differential of 1% and taking the month of October 2023 as a reference (since most real estate loans are revised at 12 months), when the Euribor closed at 4.16%, The monthly fee was 765.30 euros.
Now, with the provisional average for October 2024, which amounts to 2.721%, the mortgage payment of owners who have a revision in September will drop to 615.70 euros, which means that They will pay 149.6 euros less than a year ago and the first reductions in monthly mortgage payments will begin to be felt.
