Division of opinions on the Euribor: How low can it go?

The 12-month Euribor signed its third consecutive monthly drop in January. The index, on which the cost of around four million variable mortgages depends, starts the month of February at 3.609%, slightly below the 3.679% in December.

The speed of the fall loses strength compared to the previous two months. In November, the Euribor fell to 4.02% from the 2022 high of 4.16%. In December the decrease was even greater, up to 3.67%, hand in hand with strong expectations of decreases in interest rates in the euro zone. At that time, the forecasts were very aggressive: seven decreases of 25 basis points were expected with a first cut in March.

Now, although bets on a first cut in April are growing slightly, the market consensus places the first drop in June. This scenario drives the volatility of the Euribor due to growing doubts about when and how much the rate reduction will begin.

"The official message from the European Central Bank (ECB) delays the rate cut until the beginning of summer, which leads us to estimate that the Euribor would remain around 3.5% in the first half of the year. As of There, the most likely thing would be that it would decrease progressively until it was around 3% at the end of 2024," explains Estefanía González, from Kelisto.es.

XTB's Joaquín Robles believes that the index "will remain at current levels until the first rate cut occurs."

The consumer association Asufin believes that, "if economic conditions are not altered", the Euribor would stand at 2.6% in December.

The Bank of Spain affirms that the transmission of the increase in interest rates to interest payments on outstanding loans of households and companies at a variable rate "would be practically complete" already at the end of November of last year and that at Throughout 2024, these interest payments "would experience a gradual decline, stabilizing in 2025 at levels higher than those in force before the tightening cycle"

In any case, January already represents a relief for mortgages with semiannual review, which become cheaper by around 500 euros per year. On the other hand, loans with an annual review will have to wait to pay less.

An average mortgage in Spain of 150,000 euros with a term of 25 years and a differential of 0.9% will pay a bill of 843 euros, that is, 23 euros more per month than 12 months before. A year it represents 276 euros more.

According to a report on the financial situation of households and companies prepared by the Bank of Spain, with current market expectations regarding interest rates, mortgages reviewed next March will become cheaper. And the end-2024 updates will bring cuts of more than 150 points.

The institution explains that in November 2023, variable rate loans accounted for just under 70% of the outstanding balance of both household mortgages and loans to companies.

The other impact of the fall of the Euribor is that the downward shift in mortgage prices is consolidated.