The Euribor ends January at 3.6%: the first reductions in mortgages arrive

The 12-month Euribor has started the year with declines and brings with it the first reductions in mortgage payments.

The reference indicator for the majority of variable rate loans in Spain has closed January with a monthly average of 3.609%, so it has already had three months of declines, after ending October 2023 at 4.16%, the highest level since November 2008.

After this latest monthly decline, the Euribor is below the levels it recorded six months ago (when it stood at 4.149%), although it remains higher than a year ago (in January 2023 it stood at 3.337% ). In fact, the January level is the lowest in 11 months.

This means that those mortgages that have a semiannual review will experience a reduction in the monthly payment, although said savings will not materialize if the conditions are reviewed annually. In this case, consumers will suffer a new increase in the fee.

In the semiannual reviews, the savings could exceed 40 euros per month. On the other hand, the annual reviews will bring an increase of about 24 euros per month for a variable mortgage of 150,000 euros signed for 30 years and with a differential of 0.99% + Euribor. However, in most cases the increase in installments will be lower, since this simulation takes into account the entire capital of the mortgage and the entire term to be met.

Let us remember that the amortization system used in Spain implies the payment of higher interest during the first years of the life of the loan, so those loans that have already been in the payment process for years will face more moderate increases.

Mortgage reductions will increase in spring

As experts already predicted at the beginning of the year, the moderation of the Euribor will gradually lower the prices of variable mortgages. And, if the scenario does not change drastically, everything indicates that the drop will also arrive in spring for those who have an annual review. A saving that will increase as the year progresses.

In its latest report on the financial situation of households and companies, the Bank of Spain considers the transmission of interest rate increases to the economy settled and points out that families and companies are going to begin to notice a drop in the cost of your debt, including your mortgage.

"With current market expectations on interest rates, the revisions would become downward in March 2024 for annual review contracts linked to the 12-month Euribor, reductions that would be greater than 150 basis points for those updates. that take place in the last part of 2024", states the Bank of Spain. And he points out that "between December 2023 and March 2024, 7% of the outstanding balance of variable rate mortgages (almost 70% of all mortgages in Spain) would see their cost increase by 100 basis points or more, while "10% of mortgages would see drops of at least 50 basis points."

However, experts expect the big change to come in the second semester.

“The impact has to be positive, especially on the 12-month Euribor, while in shorter terms we will probably not see a substantial drop until the ECB's reference rate cuts materialize. For those who have a variable mortgage, especially those who have reviews starting in April, they will begin to notice the effects of this drop in the Euribor, and those who have the review in the second part of the year will see their monthly payments fall by a percentage. superior. For those who are looking for housing, this is also good news, since at the beginning of the year we have already seen how the majority of banks have revised their mortgage offers downwards, a trend that we hope will consolidate as the year progresses.

Along the same lines, the Association of Financial Users (ASUFIN) points out that the decreases in mortgage payments "will be more intense as the year progresses, especially in the months of July and September", when the Euribor was above of 4%. According to its forecasts, the Euribor could be around 3.3% in March (compared to 3.647% in March 2023) and drop to 3% in June, when interest rates are expected to begin to fall.

Leyre López, analyst at the Spanish Mortgage Association (AHE), joins this forecast and explains that "mortgages that are reviewed semi-annually and that are due for review now may already experience a drop in the payment at the beginning of this year." , but in the case of those that are reviewed annually it will not happen until April or May taking into account that the loan will be updated semiannually or annually according to the reference value of the index one or two months before the review period.

A stable Euribor until the ECB lowers rates

Regarding how the Euribor will evolve in the coming months, the consensus is cautious and does not foresee major changes upwards or downwards. The turning point will come with the first drop in interest rates carried out by the European Central Bank (ECB), which currently remains at 4.5%, although there are still doubts about when this decision will come. Some analysts and economists lean towards April, while others are betting on June-July.

What there does seem to be a consensus on is that, whatever the case may be, the reduction in the price of money will cause a faster drop in the Euribor than it has experienced recently, in the same way that it rebounded considerably during the cycle of 10 consecutive increases that The Euro Guardian was carried out between July 2022 and September 2023.

In fact, the expert considers that, when the ECB begins to lower rates, the Euribor will fall more quickly than it is already doing, in the same way that it rose considerably when the increases began.

The Savings Bank Foundation (Funcas) and CaixaBank estimate that at the end of the year the 12-month Euribor will be around 3%, about six tenths below the current level, while Bankinter believes that it will fall less, until the end of 2024. close to 3.25% and reach 2.75% in 2025. For its part, the Association of Financial Users (ASUFIN) foresees faster declines, with a Euribor close to 3% in the middle of the year.

For now, at least, the 12-month Euribor has moved below 3.6% in the daily rate in the last four sessions; that is, after the last meeting of the European Central Bank. On the last day of January it remained at 3.572%.