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Average monthly mortgage payment up by almost 280 euros in Spain as Euribor rate approaches 4%

Average monthly mortgage payment up by almost 280 euros in Spain as Euribor rate approaches 4%

Personal finance ·

A year ago, the indicator used to calculate the interest on most property loans was only 0.287%

Nuria Triguero

Malaga

Wednesday, 31 May 2023, 12:45

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There is no ceiling in sight for the rise in the Euribor. The most widely used index for calculating interest on variable interest loans will close the month of May with a new rise. On 31 May the provisional average stood at 3.853%, compared with 3.757% in April. Therefore, in the absence of knowing the final figure for May, homeowners whose mortgage contracts will be reviewed in the coming weeks should already be prepared for the fact they are going to pay almost 300 euros more per month on average, according to a calculation made by the comparison website HelpMyCash.

Although the monthly rise is small, the increase will be significant for those mortgages that are reviewed annually with the value of the Euribor in May; a year ago the index was at only 0.287. The repayments of loans updated on a half-yearly basis will also become more expensive, but as six months ago the Euribor was already close to 3% (2.828%), the interest on these loans will rise less.

For example, a variable mortgage with an outstanding amount of 150,000 euros, a term of 25 years and an interest rate of Euribor plus 1% would go from having a monthly payment of 585 euros to almost 865 euros per month – an increase of almost 280 euros per month (around 3,356 euros per year). If it is reviewed every six months, the monthly instalments will go from around 778 euros to almost 865 euros – around 87 euros more per month (approximately 522 euros more per six months).

The increase in repayments will of course vary depending on the conditions of the revised loan, such as the amount and term outstanding or the differential (which is added to the Euribor to calculate the interest rate).

In the short term, everything suggests that the Euribor will give no respite to variable-rate mortgage holders. According to Miquel Riera, mortgage market specialist at HelpMyCash, "it is very likely that this rate will continue to rise, because the European Central Bank (ECB) is expected to raise its rates again in mid-June to contain the high inflation in the euro zone".

ECB president Christine Lagarde, announced at the beginning of May a rate hike (from 3.5% to 3.75%) and stated that it would not be the last. And, according to Riera, the ECB is likely to raise its interest rate to 4% at its next meeting on 15 June, which means that the Euribor will probably close the second quarter of the year with an average value of around 4.25%.

So, will the Euribor reach 5% this year? It is too early to tell but experts say that it is unlikely that both interest rates and the Euribor will fall. "For this to happen we would have to enter a recession. Although for a little over a year now many analysts have been predicting that the United States will go into recession and that Europe will follow in its footsteps, the fact is that so far this has not happened and these forecasts have not been fulfilled," said Olivia Feldman, co-founder of HelpMyCash.

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