The fall of the Euribor is exceeding the most optimistic forecasts. The indicator with which variable mortgages are calculated stood at 2.63% this Monday, its lowest level since October 28, 2022, almost two years ago, after starting the week with a sharp drop. The digestion of the European Central Bank meeting last Thursday, in which Frankfurt agreed to a new cut in interest rates, is being slow but very favorable: on Friday the Euribor remained almost flat, but the week began with a significant collapse.
With eight more sessions left to close the month, October can be a considerable relief for those who see their annual fee reviewed soon. In the scenario of an average mortgage (140,451 euros to pay in 23 years, according to INE data for 2023) with a differential of one point, the savings are around 120 euros per month or 1,440 euros per year. In July 2023 the average was much higher, 4.160%, and this difference now favors those with mortgages, who have been hit hard in the last two years.
Of the 15 days in October in which data have been known, 11 have resulted in decreases, and in only four have there been increases. This may cause October to experience the steepest annual reduction in the Euribor since July 2021, with a difference of about 1.5 points compared to where it was 12 months ago.
The speed of the decline is quickly outdating analysts’ perspectives. By the end of this year, the Funcas Panel—which brings together the forecasts of 20 analysis services—expected the Euribor to be at 3.3% and the Association of Financial Users (Asufin) at 3%, although it later reduced that figure. figure at 2.8%. Bankinter too. The bank predicted in June that the Euribor would close the year at 3.5%, but in September it updated that percentage to 2.75%. Unless there is a change in direction, it will remain above: this month’s average is already lower, at 2.745%, and there are no short-term catalysts for things to change. The time horizon of its projections goes further: by 2025 the bank estimates that the Euribor will drop to 2.5%, but that by 2026 it will rebound to 2.75%.
The collapse of the Euribor is already encouraging a mortgage war between financial institutionsalthough the reduction is not always immediately transferred to its commercial offer, so it is foreseeable that the most pronounced phase of the reduction is yet to come. At a time when problems with access to housing are at the forefront of the political debate, the fall can facilitate financing for those seeking to go into debt to buy and who previously did not meet the requirements demanded by the banks, but at the same time there is a risk that increased demand will boost prices and neutralize the financial advantage of interest savings.
The collateral effects exceed the scope of the loans. Paying less in monthly payments or changing a prohibitive rent for a lower mortgage means more money in the pockets of households, and therefore, more room to consume and boost the economy.
The moderation of inflation below the ECB’s 2% target, something that has not happened since June 2021, and growing concerns about the mediocre economic growth rates in the euro zone, especially in Germany, are supporting a looser monetary policy , and with it, the fall of the main mortgage indicator, whose trend is meteoric: On September 9, it broke the psychological barrier of 3% after almost two years above, and now it is just a stone’s throw away from 2.5%.
The next ECB meeting, on December 12, may add fuel to the fire: the market assumes a new interest rate cut, the third in a row, and although it is not yet the main scenario, they do not rule out that this may even be the case. more aggressive, of 50 basis points, a possibility to which they give a 30% probability. They also discount cuts in the next two meetings, those in January and March.
