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HomeLatest NewsThe Euribor climbs to 4.04% and accumulates a rise of 455 basis...

The Euribor climbs to 4.04% and accumulates a rise of 455 basis points in 18 months

Date: June 18, 2024 Time: 11:41:51

Bad news for mortgagees and the real estate market in general. The reference rates for home purchase financing experienced a new upward spurt after the rate hike from 3.75% to 4% by the European Central Bank (ECB) last Thursday and the appointment of its president, Christine Lagarde, that they will be uploaded again on July 27.

The reaction of the loans between banks has been immediate, even before the latest decision came into force, thus anticipating the expectations generated by the monetary authority. The 12-month Euribor, the main reference index for Spanish mortgages, has risen today Monday to 4.046%, its highest level since November 25, 2008. The accumulated jump of the index since it began to rise 18 months ago now, when it marked a historical minimum in December 2021 (-0.51%), it is exceeding 455 basis points or 4.55 percentage points.

In this way, the daily increase in the Euribor pushes the monthly average for June up another notch to 3.937%, a figure that is 308 basis points (3.08 percentage points) above the same month of 2022. The year-on-year impact in the financial costs of Spanish households and families who review their Euribor-linked loan this month will be the lowest since October 2022.

Mortgages 64% more expensive in 2 years

However, it will be the second consecutive year of increase in the quota for those who have June as the reference month. For a theoretical loan of 150,000 euros for 25 years with a differential of 1 point over the Euribor, the monthly payment will go from 625 to 876 euros, that is, about 251 euros per month or 3,000 euros per year. Assume a 40% increase in the money needed to cover the mortgage. Continuing with this example case, the cumulative effect in two years will mean that the fee will have become more expensive by 343 euros per month, 64% more, or 4,116 euros per year.

The Euribor maintains its upward trend spurred on by the ECB, which has shielded its discourse on further rate hikes despite the weak economic prospects for the euro zone, which entered a technical recession in the first quarter. In its forecast update, the central bank only lowered its growth forecast for 2023 by one tenth, from 1% to 0.9%. In addition, the organization’s economists raised the expected inflation for this year by one tenth, from 5.3% to 5.4%.

Last Friday, barely 24 hours after her intervention at the end of the ECB meeting, Lagarde reiterated that it was “very likely” that the entity will increase interest rates again in July, unless they begin a significant change in economic or financial conditions. In a speech at the G30 dinner in Amsterdam, the banking gala said these restrictive rate levels would be maintained “for as long as necessary.”

“Our future decisions will ensure that interest rates are set at sufficiently restrictive levels to bring inflation back to our medium-term target of 2% at the right time,” Lagarde said despite acknowledging that the ECB’s approach remains data dependent state. Some economists considering that the monetary authority is overestimating the prospects for inflation and growth, as well as the cumulative effect that the rate hikes already carried out will have for the European economy.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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