The Euribor closes June at 0.852% after the largest monthly rise in its history

The Bank of Spain has confirmed that the 12-month Euribor closed the month of June at a monthly average of 0.852%, compared to 0.287% in May and -0.484% a year earlier, which will mean the highest monthly and year-on-year rise in its history, in addition to its highest level since August 2012.

The index to which the majority of mortgages in Spain are referenced marked a dozen daily data in June above 1%, something that had not happened for more than a decade, although finally the monthly average has been below said dimension.

The new jump of the Euribor will imply an increase in the monthly payment of those who have to do the annual revision of their mortgage at a variable rate.

Specifically, a 30-year variable mortgage of 150,000 euros and with a differential of Euribor +0.99% will suffer a monthly increase of 90.28 euros or, what is the same, 1,083.36 euros per year. If the amount of the loan were 300,000 euros, with the same conditions, the increase in the monthly fee would be 180.55 euros, so the mortgaged person would pay 2,166.6 euros more per year.

The Bank of Spain has also published that the mibor, the one-year interbank rate that served as the official mortgage market reference for operations carried out prior to January 1, 2000, also closed May at 0.852%. As for the new official interest rates that are now being published, the one-week Euribor stood at -0.57%, one-month at -0.525%, three-month at -0.239% and six-month at 0.162%.

Regarding the short-term interest rate on money (€STR), defined as the value on the last business day of the month for the purposes of Target2, the average interest rate compounded at different terms (one week, one month, three months, six months and 12 months) which is prepared and published by the European Central Bank, the reference interest rate based on the €STR at one week was -0.579%, at one month at -0.582%, at three months at -0.583%, six months at -0.58% and one year at -0.574%.

Experts expect it to continue to rise

The indicator has been boosted by the announcement that the European Central Bank will raise interest rates from 0% to 0.25% in July, while a new hike will take place in September that could raise rates to 0.75% .

The experts, who a few weeks ago did not expect the Euribor to reach 1% until the end of this year, are already updating their forecasts.

Thus, the Bankinter Analysis Department predicts that the 12-month Euribor will reach 1.9% in 2022 and 2.20% in 2023, later moderating to 2% in 2024. For its part, Asufin believes that its value will be 1.50% in December 2022 and 1.9% in 2023.

The partner responsible for the financial sector in Spain at KPMG, Francisco Uría, has no doubts that mortgage rates will continue to rise during the year. “All conditions make it obligatory that it be so. The central objective of the ECB's mandate is to contain inflation and it is obliged to adopt the necessary measures so that it returns to the level of 2% that it currently has established”, he explained.

In any case, the KPMG partner predicts that the increases, although relevant and with an impact on families, will be "reasonably moderate and lower than those of the Federal Reserve", given that the ECB will make the greatest effort to temper their effects. Thus, although he believes that the indicator will forever abandon the path of negative rates, in no case will it return to the higher interest rates recorded years ago.

The director of Mortgages at iAhorro, Simone Colombelli, prefers to be cautious when making forecasts in the current scenario of high uncertainty. “We will have to wait at least until September to see how the Euribor behaves in the summer and, from then on, be able to make an estimate of this indicator for the end of the year. Beyond that, it is very difficult to get their behavior right, ”she has acknowledged.

In this scenario, HelpMyCash recommends those affected to change their variable mortgage to a fixed rate, which would allow them stable monthly payments, regardless of the rises and falls of the Euribor. “It is still possible to get interest of around 2% or below. This is an attractive price, especially when compared to the 3% or 4% fixed mortgages that were granted just four or five years ago. However, as the entities offer increasingly higher fixed rates, it is convenient to carry out the change as soon as possible”, they assure.

From Asufin, they advise paying close attention to the combined sale of non-loan products aimed at lowering the price and warn that the final price of the contracted mortgage, in APR terms, with these products (insurance, pension plans, etc.) " it is usually higher” than if the discount applied to the interest rate is dispensed with and the market is searched for better options.

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