The month of October begins, a new opportunity for those with variable rate mortgages that have a review in the coming months, after closing the sixth consecutive month of decline in the benchmark mortgage index in September , by 2.747%. From now on, the data for this Tuesday, October 1, 2024 begins with a very slight increase in its daily rate, which places the Euribor at 2.749%.
As for the last days, after five days of consecutive declines, the Euribor increased on Friday by 0.016 basis points compared to the day before, although it had already been confirmed that it would close below the 3% mark. Then, in the last data of the month, the mortgage index fell on Monday by 0.19 basis points compared to previous data, while this Tuesday it increased by 0.002 points, confirming a stabilization of the index that it We’ll have to see if it continues. . throughout the month of October.
What happened to 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%something that has not happened since November 2022 and represents the month of consecutive declines.
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 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 property loan 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 property loans are revised to 12 month), when the Euribor closed at 4.149%, The monthly fee was 757.81 euros.
Now, with the final average of September 2024, which amounts to 2.947%, the mortgage payment of owners who have a revision in September will drop to 632.06 euros, which means that They will pay 125.81 euros less than a year ago and the first reductions in monthly mortgage payments will begin to be felt.
