More bad news to come. In addition to the increase in electricity, gas and fuel bills, and the highest inflation for almost 40 years, various research services are now warning of an imminent return of the Euribor above 0% after 6 years. This affects 75% of mortgages in Spain.
The 12-month Euribor took off strongly in March. Indeed, the benchmark indicator for most mortgages in Spain has soared, placing its provisional monthly average at -0.245%, the highest level since June 2020.
Three months of consecutive increases
The index rose for the third month in a row, after hitting historic lows in December, ahead of a possible change in monetary policy in the eurozone.
Moreover, there is every reason to believe that the strong increases will continue in April, if we take into account the fact that in recent sessions the 12-month Euribor is already at around -0.1% in rate day-to-day.
Indeed, many economists, organizations and mortgage market experts predict that the ECB will have to raise interest rates in the coming months, especially in the final stretch of the year, given the rise in the ‘inflation.
Euribor above 0% in November 2022
In fact, organizations such as Funcas (the Fondation des caisses d’Epargne), Caixabank Research or the analysis department of Bankinter estimate that the Euribor will go back above 0% in the coming months, which will mean a general increase in the cost of variable loan repayments of mortgages, which represent three quarters of the total in Spain. Funcas believes this could come in November, when Euribor could be around 0.02%.
Between 200 and 350 euros more per year on average
Loans whose terms are to be revised based on the March figure will already see an increase in repayments. For an average mortgage, the increase will be around 16 euros per month, which translates to 200 euros per year. Last year, at this time, the indicator was -0.487%. For larger mortgages, the annual increase could be around 350 euros.
75% of loans are variable rate in Spain
As the mortgage indicator gains traction, banks are improving their offering of variable loans and, in many cases, increasing the price of fixed loans. According to the Spanish Mortgage Credit Association (AHE), currently 75% of mortgages in Spain (which are still in repayment) are variable rate, while the rest are fixed rate. Consequently, the rise in Euribor will affect three out of four loans.
A Euribor that we had not seen since 2014
Bankinter has the most pessimistic forecast and places the 12-month Euribor around 0.4% this year. For 2023, both Bankinter and Caixabank’s research department see the indicator around 0.8%, while Funcas does not expect such a sharp rise: it estimates that next year Euribor will move around by 0.2%. Either way, we’d be talking about levels that haven’t been seen since 2014 and 2015.