The 12-month Euribor has resumed its bullish trend this week, with attention focused on the upcoming European Central Bank (ECB) meeting on June 15 on monetary policy, and expectations leaning towards a further move higher. However, the markets are waiting this Friday to receive a new dose of guidance from its president, Christine Lagarde, and the executive director Isabel Schnabel, who have two speeches scheduled for today.
Meanwhile, the benchmark for variable mortgages in Spain has reached today, Friday May 19, . However, the 1-year Euribor is once again close to the maximum zone above 3.9%, in which it has only traded four days this year. It was in March before the banking crisis broke out in the US with the bankruptcy of Silicon Valley Bank (SVB).
In this way, the Euribor returns to approach the maximum of November 2008, reached on March 9, close to 4%. The reference index breaks the moderation that it had shown during the last month, a period in which it has traded around 3.8% without much movement. In fact, the provisional average for May stands at 3.818%, just 6 basis points above the 3.757% it marked in April and the smallest monthly rise since January 2022.
Despite the stability in the evolution of the Euribor since April, activity in the mortgage sector is changing a significant standstill, as confirmed by the Bank of Spain in its latest bulletin released this Friday. “The results of the ECB survey on consumer expectations for February 2023 suggest that consumers expect mortgage interest rates to continue to rise in the next twelve months and, furthermore, that it will be more difficult to obtain loans to live on.” , points out the supervisor chaired by Pablo Hernández de Cos.
However, the Euribor year-on-year differential in May will continue to exceed 350 basis points, which will mean monthly installment increases of around 277 euros for a recently established 25-year 150,000 euro loan. The increase in cost in annual terms exceeds 3,300 euros. Despite the impact on the disposable income of households with a variable rate mortgage, the Bank of Spain considers that it continues to be low from a point of view of historical terms.
“The shallower depth of mortgage markets in the euro area moderates the transmission of monetary policy shocks to residential investment. Higher levels of official interest rates, more intensely to residential investment in countries with deeper mortgage markets like the United States,” he points out.