Mortgage rates in Spain will only start to fall with April's Euribor. This is the horizon drawn by analysts who expect that from now on the index used to calculate the monthly amount of mortgages will begin to stabilize and moderate. Yesterday it was confirmed that the Euribor for the month of June closed at 4.15%, a level that had not been seen in 15 years.
This means that the revisions carried out until March will be upwards although the index is likely to stabilise. The reason is that the rate change is made in comparison with the Euribor of 12 months ago. And in 2022 it was well below the current level. Just a year ago, in July 2022, for example, it was 0.9% and last month it was above 4%.
Therefore, it will not be until April when a slight moderation of the Euribor is expected to 3.70% and the index will be below the level of April 2022: 3.72%. And from that moment, in the following revisions it will also go down.
The same CEO of CaixaBank, Gonzalo Gortázar, explained on Friday in Valencia that on that day investors' expectations foresaw this first future drop in quotas after months of increases.
Adrià Morron, CaixaBank Research economist, explains that these expectations about where the Euribor will be in the coming months are built with the quotations of products linked to interest rates. "Right now the market is speculating that at some point in 2024 the rates could be lowered a little", he adds. Currently, the ECB's deposit facility rate (the rate the ECB pays for deposits that banks place there) is 3.75%. This is what the market uses to estimate the Euribor. The credit facility (rate paid to ask the ECB for money) which is 4.25% is not used because there is so much liquidity that it is not necessary to go to the Central Bank to get money to leave to customers, explains Morrón.
This expected reduction in eight months is only the expectation of the majority of investors, but it is not - by any means - a certainty. The Professor of Economics at Pompeu Fabra University (UPF), José García Montalvo, believes that expectations go along two different lines. A group of investors believe that the maximum rate level has already been reached and, therefore, are buying 5- and 10-year bonds to ensure a good return. The second group - adds Montalvo - is that of investors who believe that rate hikes will accelerate, which will leave the first group of investors trapped. "The banks opt for the first option and are now betting on mixed mortgages", points out García Montalvo. The idea they are selling is that rates will remain high for about five years while the mortgage is fixed, and then, when they switch to variable rates, the Euribor will be at the low levels of recent years. García Montalvo warns that he sees it more possible for the Euribor to be at the levels of the last 20 years, when it was well above the low percentages prior to 2022.
The rise in Euribor to 4.15% in July puts the theoretical increase in mortgage payments at around 250 euros for a standard loan of 150,000 euros over 30 years with a differential of Euribor plus 0.5 %. In reality, the increases are usually smaller because many of the mortgages are already quite advanced in their repayment period, which reduces the impact of the Euribor rise.
