Does the rise of the Euribor have a brake? the end is not yet in sight

The rise of the Euribor seems to have no brake.

Thomas Osborne
Thomas Osborne
01 March 2023 Wednesday 09:26
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Does the rise of the Euribor have a brake? the end is not yet in sight

The rise of the Euribor seems to have no brake. Last month it closed at 3.5% on average, but this Tuesday the daily rate already stood at 3.7%, so it is expected to continue rising in the coming weeks. How long?

"It could go up to 4% or 4.25%, seeing that the economy has not just slowed down with the measures put in place," answers José García Montalvo, professor of Economics at Pompeu Fabra University (UPF). The economist believes that "what is seen in the markets is that investors do not believe the warnings issued by the European Central Bank (ECB)".

Customers who have their mortgage reviewed with the index for the month of February will suffer an increase in the fee of more than 50%. Mortgage payments have been going up for more than half a year and this process has no end for now. A typical customer with a 25-year mortgage of 140,000 euros (the average in Spain) paid 506 euros up to now and with the change he will pay 778 euros, more than 50%. In February of last year, the Euribor was still in negative territory (-0.335%). Instead, it is now at the aforementioned 3.5%. There are almost four points of rise in 12 months.

Leyre López, an analyst at the Spanish Mortgage Association (AHE), acknowledges that "it is difficult to interpret how the Euribor will evolve, since it will depend a lot on what inflation does, which continues to rise." López adds that it is possible that the rates in the short term are close to 4%, taking into account that the ECB will raise them again in March. Therefore, the Euribor could be somewhat above that level.

The AHE analyst qualifies that the 50% increase in mortgages is for loans made recently, since in the oldest the installment increase will be significantly lower.

The consequence of the Euribor rise is that the market is clearly slowing down. García Montalvo remembers that last year it went from less to more and a slowdown in the granting of loans was already seen in the last month.

On Tuesday, the Second Vice President and Minister of Labor, Yolanda Díaz, already anticipated that the rise in inflation in February, to 6.1% according to advance data, and the closure of the Euribor indicate that the measures taken by the Government "are insufficient and they do not serve the purpose set”.

Sources from the iAhorro mortgage comparator explain that if the Euribor reaches 4% before the summer, debt levels could skyrocket, both for people already mortgaged, which may also increase delinquency levels, and for future mortgages, which may opt only for increasingly cheaper houses and, even, the banks may not grant them the mortgage if they are fairer.