The one-year Euribor rate, which serves as the primary benchmark for calculating variable-rate mortgages in Spain, recently dropped to 3.503%. This is the lowest level it has reached since 2023, as of July 18. Although we are still awaiting the official figure for the month, predictions indicate it will settle around 3.55%, marking a decrease from 3.65% in June and over six-tenths lower than July of last year, when it peaked at 4.149%. This latest decline represents the fourth monthly drop in 2024 and suggests potential future reductions in payments for variable-rate mortgages.
According to the financial product portal Help My Cash, this could translate to annual savings exceeding 600 euros for borrowers. However, they caution that those with loans updated annually will see more significant reductions compared to those with semi-annual updates. For instance, a borrower with a typical variable mortgage of 150,000 euros over 25 years, and an interest rate of Euribor plus 1%, would experience a monthly payment drop from nearly 890 euros to around 838 euros—resulting in savings of approximately 52 euros each month and about 623 euros annually.
Conversely, those with semi-annual adjustment contracts might find the reduction nearly imperceptible. Since the Euribor value was slightly higher in January 2024 at 3.609%, monthly payments for these contracts will only decrease from about 843 euros to 838 euros, amounting to just a 5 euro reduction and 30 euros over the six-month period. It’s important to note that these figures can fluctuate based on the outstanding mortgage balance, remaining repayment term, interest rates, and the contract’s origination date.
Moreover, Gibobs.com reports that the decrease in Euribor in June benefited approximately 45% of variable-rate mortgages in Spain and contributed to a 1% increase in the average property value, now reaching 229,854 euros. This represents a rise of 2,228 euros compared to the first quarter of the year.
In its recent meeting, the Governing Council of the European Central Bank (ECB) opted to maintain interest rates at 4.25%, awaiting more data to confidently predict that inflation will reach their 2% target. The previous cut occurred in June when the institution reduced the three main interest rates by 25 basis points.
Miquel Riera, a mortgage analyst, explains that the interest rate cuts will lead to a decrease in the Euribor, which is heavily influenced by ECB policy. However, he warns that the decline won’t be sudden. Currently, with ECB rates at 4.25% and the Euribor close to 3.50%, the significant gap suggests that the Euribor is already anticipating a future interest rate reduction. Riera notes that a situation similar to December 2023 may arise, with the Euribor either stabilizing or experiencing a slight drop in the latter part of the year.
For more information on current mortgage rates and the Euribor, you may explore resources such as the European Central Bank’s official website or financial news platforms.
Image and News Source: https://www.infobae.com/espana/2024/07/25/la-bajada-del-euribor-puede-suponer-un-ahorro-de-mas-de-600-euros-anuales-en-tu-hipoteca/
