Euribor gives mortgage customers another boost as July clocks up 18-month lows

The interest rate used by European banks registers the biggest fall of the year to date and places its monthly average at 3.52%. Variable rate mortgage clients with annual rate reviews have seen four months of reductions in their instalment payments

Clara Alba

Monday, 5 August 2024, 13:19

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The Euribor (Euro interbank offered rate) ends July with a cheery note for variable rate mortgage customers. Although the lowering of interest rates by the European Central Bank (ECB) has been much slower than expected (the indicator to which most mortgages in Spain is linked), the ECB has been anticipating the end of the upward cycle in the linked rates for months. So, this July it ends at 3.52%, registering its biggest fall of the year since 3.65% in June, and much more significant when compared with the 4.149% recorded in July 2023.

With this change the demand for mortgages is beginning to reactivate and those who already have a contracted house loan and are due their annual rates review will see their repayments fall by 49 euros per month (for the average mortgage). In other words, they will pay around 586 euros less per year, according to calculations by Kelisto, a financial products comparison platform.

Those who review their mortgage on a half-yearly basis will see their payments fall by around six euros per month (37 per half year). "Despite the uncertainty about what the ECB might do in the coming months and how its decisions will impact the Euribor, one thing seems pretty clear: the summer and early autumn will bring good news for those who have to review their variable mortgage," explained Estefanía González, Kelisto spokesperson.

It should be borne in mind that these figures are only an example and would change depending on the year the mortgage deal was signed, the amount and the repayment period agreed between the customer and their bank. For example, for a mortgage below the average (of 100,000 euros) that is reviewed in August the reduction would be 34.92 euros per month (419 euros less per year), while for a mortgage of 200,000 euros it would be 69.84 euros less per month (838.10 euros per year).

Forecasts

The Euribor has thus accumulated eight consecutive months below 4%. So that makes four in a row in which mortgage customers have obtained reductions in their repayments at the annual review. A situation that has a lot to do with the ECB's decision to put an end to rate hikes and to start lowering rates, albeit done more slowly than expected given how difficult it is proving to overcome that last bit of inflation.

Against this backdrop, and with the ECB expected to be cautious in its movements from September onwards, analysts differ in their estimates for the Euribor between now and the end of the year. "Although it will not experience sharp falls, the year-on-year comparison will begin to be made with the maximum levels of 2023, when the index reached 4.16% and this will allow some juicy reductions in monthly repayments", insist Kelisto (their analysts do not expect the year to end below 3.4%-3.5%).

The forecast for the Euribor for 2024 made by other institutions and organisations remains unchanged from previous months and places the Euribor in a range between 3% and 3.5% by the end of 2024. Bankinter and Funcas are the ones forecasting the highest figures for year end (3.5% and 3.3% respectively), while Caixabank places the Euribor at 3.03% and Asufin at 3%.

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