Euribor, the index to which most variable rate mortgages are referenced, This Thursday, September 11, 2024, it stands at 2.929% in its daily pricemeaning it continues its downward trend, after falling below 3% on Monday. Since then, the index has seen sharp declines due to high expectations of sharp rate cuts from central banks. Indeed, this Thursday, the ECB meeting made a further rate cut of 25 basis points.
The Euribor accelerated its decline on Thursday, before the ECB announced the second rate cut this year. The previous one was in June and now a second cut of 25 basis points has been made, which leaves the deposit rate at 3.5%.
Since the end of August, the Euribor had already started to integrate the new declines. The index closed at 3.166% and recording the largest monthly decline since 2009since July, closed at 3.526%, a decrease of 0.36 percentage points. Thus, September began on a similar note, with hopes that the reductions will continue.
In addition to today’s decline, the market is anticipating Two new cuts from the ECB to leave the deposit rate at 3% in December. There are only two meetings left. The market is more aggressive towards the Federal Reserve and is predicting five cuts in the three remaining meetings of the year. In the United States, the market is predicting rates to fall from 5.5% to 4.25%.
This Thursday’s data, at 2.929% in daily rate, follows the dynamics of previous days, with a slight decrease of 0.031 percentage points compared to Wednesday. In this way, the figure is consolidated below 3%, a value also anticipated by the Euribor futures, one of the indicators most used by analysts, for the end of the year.
How is Euribor calculated?
The Euribor is called the European InterBank Offered Rate and is calculated by a panel of European banks that report daily at what rate interbank loans are granted. Since 2020, the calculations have been carried out in a hybrid manner. Panel data are included, but also the market’s own estimates, in order to reduce volatility and the risks of manipulation, to which these indices were subjected at the beginning of the century.
The panel is composed 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 to each other is published. one week, one month, three months, six months and 12 months.
How does this impact my mortgage?
This downward trend that the Euribor is experiencing directly affects mortgage revisionsboth half-yearly and 12-monthly, as banks recalculate variable mortgages with the monthly average, up or down from data from six or twelve months ago.
To see it with an example, for a mortgage of 140,000 euros over 30 years (360 months), with a differential of 1% and taking the month of September 2023 as a reference (since most mortgages are revised at 12 months), when the Euribor closed at 4.149%, The monthly fee was 764.35 euros.
Now, with the provisional average for September 2024 currently standing at 3.022%, homeowners’ mortgage payments who have an exam in September will fall to 637.43, which means that they will pay 126.92 euros less than a year ago and the first reductions in mortgage payments will begin to be felt.
