HE euribor a year, which index is the most mortgage variable rate In Spain, the daily rate fell significantly from normal this Tuesday from 3,858% to 3,509%, the lowest level since 13 February. The decline is in response to the intervention of Silicon Valley Bank (SVB) in the US, which has led the market to expect that central banks will have to step back. slow the rate of growth interest rates officers to fight inflationgiven the risk that such tightening of monetary policy could cause the collapse of other banking institutions and even a financial crisis.
“Following the weekend collapse of the SVB, the Fed is likely more cautious approach Vincent Vinatier, portfolio manager of AXA Investment Managers, managed to summarize the issue in a note. That’s why some analysts point out that the Federal Reserve may raise rates by 25 basis points at next week’s meeting – even leaving it unchanged from the current level (4.5-4.75%) instead of the expected 50 basis points until a few days ago. They also expect it to soften the next increases. because this index (measures the average rate at which European banks lend to each other) forecasting monetary policy movements.
The reason for this change in expectations is precisely because the decline in the SVB was driven by the strong increase in official rates, although the main reason was the mistakes of the managers and the gaps in US banking regulations and supervision. Focusing heavily on the niches of customers of emerging technology companies, the California bank has more than doubled its deposits since the pandemic and used these resources to purchase long-term U.S. Treasury public debt (50.6% of assets at end 2022: $99,580 million). The problem is when interest rates rise, the interest on public debt rises, but its price fallsThe bank was faced with assets that lost a significant part of their value compared to the price they paid, which caused huge hidden losses that began to occur as customers began to pay. withdrawing deposits in bulk.
ECB pending
As far as the euro area is concerned, it seems less likely European Central Bank (ECB) You missed the 50 point boost you were looking forward to. base from the current 3% at this Thursday’s meeting. The reverse could cast a shadow over the continent’s banking system when the message the authorities are trying to send is that their own situation has nothing to do with the situation that led to the SVB’s downfall. More skeptical are the messages from the agency’s president, Christine Lagarde, about the agency’s next steps.
Following the CVB’s decline, the market revised downwards its wildly changing expectation of how much the ECB could raise rates. But not all analysts agree. “The ECB says economic activity data is slightly higher and that Core inflation at all-time high. This requires a more restrictive policy. Beyond this meeting, the ECB can try to deal with uncertainties without providing clear guidance on future decisions. “Instead, they will emphasize relying on data and give themselves the option to pause before too long if the situation worsens,” said Paul Diggle, Abrdn chief economist.
Regardless, Euribor’s monthly average to March is 3.8401%, well above 3,534% in February and -0.237% in March last year. This means that there will be strong increases in housing loan payments, which should be reviewed with the final data for March. The current monthly average goes to pay 881, or 311 euros more, than the monthly fee of 570 euros for a 24-year mortgage of 150,000 euros at a rate of Euribor plus 1%. 3,732 euros per month and more per year. For a 300,000 Euro loan with the same features, the increase will increase from 1,140 Euros to 1,763 Euros: 623 Euros per month and 7,476 Euros more per year.