Euribor in August 2022 climbed to 1.25 percent, the highest level since May 2012 when it reached 1.266 percent. The latest rises in the variable mortgage reference index were sharper in the final days of the month, with values surpassing 1.5 percent. On Monday the 29th it hit 1.612 percent, on Tuesday the 30th it rose to 1.758 percent, and by Wednesday the 31st it stood at 1.778 percent, the peak daily figure since January 2012.
This pace marks the largest eight month increase seen in a single year, widening by more than 1.72 percentage points from January 2022 when Euribor stood at minus 0.477 percent to the end of August 2022. Experts describe this shift as highly unusual for Euribor, which typically does not move by more than a half percentage point over a year. The mortgage market is undergoing a wave of adjustment, according to industry observers.
Despite the volatility, analysts emphasize that the rise should not cause panic. The recent movement is viewed as a normalization after an abnormal spike a year earlier. A spokesperson for iAhorro notes that if current trends persist, Euribor could continue to climb in the coming months.
How much does an annual review raise a mortgage payment under a variable rate?
For borrowers with variable rate loans, the August review is bad news since payments continue to creep upward. Consider a new variable mortgage of 150,000 euros over 30 years with a margin of 0.99 percent plus Euribor. If Euribor is 1.25 percent, the monthly payment would rise from 448.26 euros to 568.29 euros, an annual increase of 2,880.72 euros. The yearly impact would be even greater for a 300,000 euro loan, increasing from 896.52 euros per month to 1,136.58 euros, a total annual rise of 2,880.72 euros.
Regarding a loan of 300,000 euros with the same structure, the annual payment would grow by about 2,880.72 euros as well, reflecting the same proportional shift. These figures illustrate how sensitive monthly costs are to Euribor moves in a variable mortgage.
Fixed rate options up to three percent
For home buyers and refinancers, expectations point to a continued split in the market. Banks are likely to maintain stable spreads on variable mortgages, with a possibility of slight reductions. Some lenders already offer variable deals with margins as low as 0.5 percent above Euribor for strong profiles.
Fixed rate loans have experienced broad increases and may rise further. Where fixed rates hovered around two to 2.5 percent, some scenarios suggest levels near three percent or higher. Industry voices recommend caution when locking in a fixed term unless compelling terms are available. If given the choice between fixed, variable, or mixed structures, a mixed rate loan often presents the best balance.
The logic behind mixed loans remains straightforward. The portion tied to a fixed rate for the initial years can be more favorable than a fully fixed product. If a borrower prefers to switch to Euribor during the later, variable phase, the transition can usually be completed without hurdles.
What could Euribor do by year end
Forecasts from industry analysts suggest a softening trend could appear as the year progresses. When looking at monthly changes since January, the average increase in Euribor has been around 0.2 percentage points per month. Some projections place the year-end level near two percent, while observers caution that the pace could slow in the final quarter. The last three months of the year have shown a gradual easing signal, and the overall consensus points to a possible Euribor around 1.6 percent by year end.
This outlook reflects the ongoing interplay between economic data, central bank expectations, and the housing finance environment. Market participants keep a close eye on inflation trends, policy signals, and mortgage product offerings as they navigate the evolving landscape.
Overall, borrowers with current or upcoming variable rate loans should prepare for higher monthly payments if Euribor continues to rise. It remains prudent to assess the affordability of different loan structures and to consider whether a mixed or fixed rate option could provide greater payment stability in the near term. Market observers and mortgage advisors emphasize staying informed and consulting with trusted financial professionals to tailor decisions to individual circumstances.
Citations: industry analysts and mortgage advisors from leading market firms.