Mortgage holders end the year with encouraging news. Euribor finished the period at 3.679 percent, the lowest monthly average seen since March. The indicator hovered around 3.647% during the same timeframe.
Meanwhile, the benchmark index reached record levels, with December averaging around 3.5 percent, about half a percentage point below the figures observed in November.
Will this trend hold in the coming months? Experts advise caution. “Be careful and don’t rise too quickly, because Euribor is likely to stay near 3% for several months before continuing its descent,” notes Simone Colombelli, director of Mortgages, a mortgage comparison platform, and advisor at iAhorro.
Nevertheless, Colombelli admits the year-end Euribor readings were surprising. “We expected a dip, but not to this extent. The decline should be gradual, with Euribor settling roughly between 3.5% and 3.7%,” he explains. He also cautions that sustaining such a rapid drop is unlikely and that a small rise cannot be ruled out to relevel the index around 3 percent.
A lower Euribor particularly benefits borrowers with variable-rate mortgages. For those whose installments adjust every six months, the impact is already noticeable. For example, a €150,000 loan with Euribor plus 0.99% interest could see monthly payments fall to about €761.53, trimming roughly €27 to €30 from the payment each month.
Those with variable-rate mortgages tied to annual reviews may not yet see a drop in installments. Using the same €150,000 loan example, monthly payments of €761.53 would still be slightly higher than December 2022, when the payment stood at €707.01, meaning the improvement is gradual rather than immediate.
What about mortgages with annual rate reviews? Analysts say the effect should become noticeable as early as March or April, with monthly payments nudging downward only modestly, according to iAhorro projections.
Euribor declines also influence fixed and mixed mortgage products offered by banks, making them cheaper overall. A related factor to monitor is official interest rates. There is no indication that the European Central Bank plans to cut rates soon, a move that would further ease mortgage costs for many borrowers.
“It’s worth remembering that even when Euribor sits above 4%, fixed-rate mortgages can still be under 3% for solid, well-qualified borrowers. We could see fixed-rate options around 2% within a few months, presenting attractive opportunities for future borrowers,” emphasizes Colombelli.
Negative Euribor… could it happen?
While negative Euribor would benefit borrowers with variable-rate loans, it does not imply a healthy economy. “A negative Euribor signals a crisis and usually requires cheap money to spur consumption and investment,” stresses Colombelli, mortgage director at the comparison platform and advisor at iAhorro.
Given this context, what would constitute a good Euribor level for the economy? “A Euribor around 2% or just under could strike a balance: high enough to encourage savings, yet low enough to make borrowing affordable,” Colombelli notes.