The average of the 12-month Euribor will close April, although by the minimum, in positive territory. It is something that has not happened since January 2016 and will cause a considerable increase in mortgage prices due to what happened a year ago, when this indicator was very close to its historical lows. The escalation of inflation reinforced by the war in the Ukraine has, however, completely turned this situation around. After more than six years in negative territory, as a result of economic stimuli from the European Central Bank (ECB), in the middle of the month the daily value of this indicator turned positive. This has been maintained since then, raising the monthly average. This Friday, the 12-month Euribor marks 0.166%, which leaves the monthly average, which was still negative until Wednesday, at 0.013%.
The Euribor is actually the interest rate at which a group of banks are willing to lend money to each other. Its importance in Spain lies in the fact that the value marked by this 12-month indicator is the one referenced by most variable mortgages, which until recently largely dominated the market. That means that most loans are updated once a year with the corresponding monthly average. Thus, when the Bank of Spain confirms the latest value, and the average of 0.013%, the mortgages that are updated with the April reference will see their quotas increase, because a year ago the average was -0.484%. This is a jump of almost half a point, the largest in more than a decade since it is necessary to go back to November 2011 to find a greater interannual variation.
Transferred to the cost of an average mortgage of 150,000 euros, with a maturity of 25 years and a rate of Euribor plus one point, the update would mean having to pay a letter of 33 euros more per month or, what is the same, 396 euros more year. In other words, if until now a loan of this type had an approximate fee of 533 euros, according to the calculator of the Spanish Mortgage Association, now it would cost just over 566 euros.
The fact that the monthly average ends positive also has another consequence. Although land clauses were prohibited in the 2019 law regulating land contracts, they can still be present in contracts signed prior to this date. These clauses, highly questioned by the Justice, imply that the quotas could not be lowered below a limit even when the Euribor fell. In practice, it meant that if a loan had a floor of 0%, you could not benefit from the fact that the Euribor was negative and you only paid the agreed differential. That is, the letters have remained unchanged for years. Now they would become more expensive, although they would do so very slightly when taking that monthly average of 0.013% as a reference.
The future is not bright for borrowers. Most experts agree that the Euribor will continue to rise as a result of the Russian invasion of Ukraine, which has pushed up inflation due to energy prices, and uncertainty about the economy. As a measure to control this high price, the ECB has already announced that starting in the summer it will change its monetary policy. The first step will be to stop buying new debt on secondary markets, one of the measures that has helped keep interest rates low. And, if it is not enough, it could do like other central banks that have already officially raised rates, something that analysts assume will happen this year. Thus, Bankinter forecasts that the Euribor will continue to rise this year to close it at around 0.4%. Banking user associations such as Asufin believe that the indicator will climb even higher, up to 0.5%.
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