The 12-month Euribor it soared in June, exceeding 1% for several days, maximums not seen in almost a decade. Thus, the monthly average is above 0.8% (0.832% in the absence of two values) compared to 0.287% in May and -0.484% just one year ago. The upward trend of the Euribor has accelerated with the market already discounting a rise in interest rates of 25 basis points in July. The president of the European Central Bank (ECB), Christine Lagarde, reiterated on Tuesday that in September the rise could be greater to stabilize an “undesirably” high inflation.
The change in direction in the ECB’s monetary policy has pushed up debt yields and put pressure on the interbank market, boosting the Euribor, which returned to positive in April for the first time in more than six years. Since then, the indicator has practically not stopped climbing, which has caused a turnaround in the mortgage market.
On the one hand, the variable mortgages already granted are getting considerably more expensive. The monthly installment of an average loan of 150,000 euros over 25 years with a spread of 1% on the Euribor will go from 533 euros to 621 euros, which means paying 88 euros more per month and 1,056 euros more per year. For a pending amount of 180,000 euros, the letter 108 euros per month or 1,300 euros per year.
“The Euribor, historically, had never risen so much in such a short period of time, but we are also experiencing an exceptional macroeconomic situation,” explains the director of Mortgages at iAhorro, Simone Colombelli. In fact, the war in Ukraine is now four months old, with an increase in tension between Russia and the West, and the drumbeats of an economic recession with a horizon of rising interest rates to curb inflation.
On the other hand, the strategy of financial institutions has made a 180 degree turn. Banks, in a generalized way, have been lowering the variable mortgages to increase hiring and take advantage of the increase in the Euribor, which now improves bank margins. The differentials that are added to the Euribor are already down 0.8% in entities such as Evo Banco, Pibank, Ibercaja, BBVA and ING.
In turn, the sector is raising the prices of fixed mortgages. Here, the adjustments are being gradual, but they have intensified in recent weeks to the point that offers below 2% APR have already disappeared. Not long ago you could find rates of around 1.5% APR. Now, in at least seven banks (Banco Santander, Sabadell, ING, Bankinter, Abanca, MyInvestor and Coinc) interest exceeds 3% APR.
The cheapest fixed rates are marketed by TargoBank (2.10% APR at 15 years), Openbank (2.32% APR at 15 years), Evo Banco (2.33% APR at 25 years), BBVA and CaixaBank (2, 81% APR at 15 years and 30 years, respectively) and Ibercaja (2.95% APR at 25 years).
In all banks, except MyInvestor and Coinc, mortgages are subsidized, that is, the client has to be linked to the entity, generally directing the payroll and contracting various insurances.
“The expectation that the ECB deposit rate will rise to 2% by the end of 2023 acts as a magnet for the 12-month Euribor, which will inexorably get closer to that figure with each passing day,” says Ignasi Viladesau, director of investments from MyInvestor.
At Roams, a digital adviser in personal finance, they believe that more and more people are deciding to switch to a fixed-rate mortgage due to the rise in the Euribor. “It was in March 2020 when, for the first time, fixed-rate mortgages exceeded variable rates, a trend that, far from reversing, consolidated and began to take off definitively in January 2021,” they point out. In April, just when the Euribor touched positive values for the first time since 2016, the fixed mortgage firm registered a new historical maximum, accounting for 75.3% of the total, according to the latest Statistics data.
In Roams they consider that the strong increase in demand for fixed mortgages by consumers has led banks to make this type of loan more expensive, since they now prefer to bet on variable rate loans. However, the increase in prices (BBVA, Bankinter, MyInvestor and Ibercaja have almost doubled rates since the beginning of the year) could begin to discourage the preference for fixed mortgages. “It is possible that we are facing the last opportunities, before a runaway Euribor, to obtain fixed mortgages at a reasonable price that some entities still offer”, they conclude.
Cajasiete and Cajamar have even eliminated this type of product from their offer. Other entities such as Banca March, Cajasur and Kutxabank do not specify the conditions in their fixed mortgages on the web. From Kutxabank they explain that they market fixed loans “adjusted to the profile of each client”.
The evolution of the Euribor has been exceeding many of the forecasts that placed it below 1% by the end of 2022. In its latest quarterly strategy report, Bankinter’s analysis department has updated the forecasts and now forecasts that the index at 12 months ended the year at 1.90%. For 2023 it estimates that it will reach 2.20% and will be placed at 2% in 2024. It should be remembered that the Euribor reached historical highs in 2008 above 5%.
For Colombelli, holders of variable mortgages have benefited in recent years from a very low Euribor (the historical minimum was recorded last December at -0.518%). But, he explains, “we are returning to more common ground for this indicator. What they have experienced in 2021 has been an exceptional situation, they have enjoyed good conditions for 12 months, but what they are experiencing now is not catastrophic either: if they continue to have an interest rate that is around 1%, this is still very good compared to what we experienced years ago”.