MADRID – As experts predicted at the end of March, it has now become a reality: the Euribor, the principal interest rate for variable mortgages in Spain, has surpassed the 4% mark, a rise not seen since 2008.
Less than 24 hours after the European Central Bank’s (ECB) eighth consecutive interest rate hike, the Euribor exceeded the 4% daily rate. This is an event that has not occurred since November 26, 2008. With a daily average of 4.020%, the provisional monthly average rises to 3.929%. Moreover, if this trend continues, the reference rate will also exceed 4% in June.
The Impact of ECB Policy Changes
The rise is a direct result of the interest rate hike announced yesterday by ECB President Christine Lagarde. The Board of Directors decided to raise the price of money by 25 basis points. As a result, the reference rate, which banks pay for weekly loans, stands at 4%; the credit facility at 4.25%, and the deposit facility at 3.5%. Lagarde warned that “the road is not yet at an end” and it is likely that the ECB will raise interest rates again in July.
The Impact on Mortgages
The Euribor’s rise has led to price increases for mortgages over the past year, especially for variable-rate mortgages. Therefore, families undergoing their annual loan review are facing a monthly payment increase of nearly €300. Those considering taking out a mortgage to purchase a property are confronted with higher prices for fixed and variable-rate loans.
Sharp Decline in New Mortgages Likely
Juan Villén, General Manager of Idealista/Mortgages, states: “It is likely that the Euribor will remain at 4% in the coming months, with a sharp decline in the establishment of new mortgages, a large volume of renegotiation of existing mortgages, with many early repayments and banks maintaining cautious credit policies, despite their aggressive commercial offers.”