The Euribor rate for a one-year horizon sits at the heart of mortgage pricing across Spain, acting as a barometer for variable-rate loans. On Tuesday, the daily figure tumbled from 3.858% to 3.509%, marking the lowest level seen since mid-February. The move comes as traders bet that central banks will slow the pace of rate hikes amid concerns about the balance between inflation control and the stability of the financial system. This signal arrives even as officials remain vigilant about the risk that further tightening could strain banks and potentially trigger wider economic instability.
Following the weekend crisis at Silicon Valley Bank, market observers expect the Federal Reserve to adopt a more cautious stance. Vincent Vinatier, a portfolio manager at AXA Investment Managers, captured the mood in a note: the Fed may lift rates by 25 basis points at the upcoming meeting or perhaps hold steady in the current range of 4.5% to 4.75. Analysts also anticipate softer increases ahead as policymakers weigh the broader impact of recent banking turmoil and the possibility of slower monetary tightening. The movement in Euribor mirrors expectations about how European monetary authorities will respond to global financial stress and the behavior of interbank lending rates in the euro area. [Source: Market commentary]
The shift in expectations is tied to the SVB episode, which was driven by rapid hikes in official rates and regulatory gaps rather than a single cause. SVB’s business model leaned heavily toward niche clients in technology and growth sectors, and deposits surged during the pandemic. The bank invested a sizable portion of its funds in long-term U.S. Treasuries. As interest rates rose, the yield on those assets moved unfavorably, while their market value declined. When customers began withdrawing deposits in large volumes, the bank confronted substantial unrealized losses. The combination of rising borrowing costs and shrinking liquidity forced the institution to confront a severe liquidity drain. [Source: Market analysis]
Could the SVB crisis stop interest rate hikes?
In the wake of SVB’s collapse, questions surged about the path of monetary policy. Some observers argue that the incident could prompt central banks to pause or slow rate increases to support financial stability. Others caution that policymakers must maintain credibility and continue to monitor inflation data. The debate centers on whether the American authorities will adopt a more cautious approach in the near term and how European institutions will respond to external shocks. Analysts emphasize that the response will depend on incoming inflation indicators and the resilience of the financial system. [Source: Market analysis]
ECB pending
Turning to Europe, expectations around the European Central Bank have shifted. It seems unlikely that the ECB will deliver the full 50-basis-point rise that some had anticipated, given the current strength of price pressures and the overall economic momentum. The baseline remains a move from the current policy rate of 3% at the upcoming meeting, though the European authorities try to signal that their messaging is not contingent on external events alone. The administration seeks to assure markets that the euro area remains on a careful path while acknowledging that new data could alter the course. Christine Lagarde has underscored that the bank will communicate decisions based on incoming information rather than a fixed plan. [Source: Market analysis]
Following SVB’s slide, markets have trimmed some of the earlier expectations for the ECB, though not all analysts are in lockstep. Some observers note that growth data has shown resilience and core inflation remains elevated, arguing for a more restrictive stance. Beyond this meeting, the ECB is expected to maintain flexibility and pause if risks intensify, rather than committing to a rigid trajectory. The emphasis remains on data dependency and a readiness to adjust policy as needed. [Source: Market commentary]
For practical implications, the monthly Euribor average for March stands at 3.8401%, higher than 3.534% in February and well above last year’s figure. This suggests that mortgage payments could rise notably, and final March data will confirm the trajectory. Currently, the typical monthly payment could increase by hundreds of euros depending on loan size and term. For a standard mortgage of 150,000 euros over 24 years, payments at Euribor plus 1% could approach 3,732 euros per month, a sizable increase from previous levels. A loan of 300,000 euros would see even larger jumps, with monthly payments potentially reaching around 3,700 to 4,000 euros or more, depending on the precise rate and term. These shifts underscore the sensitivity of housing costs to changes in interbank rates and the broader policy landscape. [Source: Market analysis]