Could the year end with Euribor below 4 percent?
In November 2023 Euribor marked 4.022 percent, its lowest monthly average since June that year. It followed August’s dip and stood out as by far the most pronounced decline in over a decade, a shift not seen since 2012. The benchmark for variable-rate mortgages slipped to 0.877 percent, down from 1.061 percent in July, and has since moved down to 0.877 percent as of November. The month-to-month drop reflects a broader easing in short-term money markets, even as the yearly path remained exposed to shifting economic signals.
East to listen to mortgage market observers, one voice stands out. Simone Colombelli, Mortgage Director at iAhorro, emphasizes caution in reading the trend. While the recent movement is a welcome relief for homeowners carrying variable-rate loans, it is not a guarantee of sustained decline. He notes that Euribor can rise again, and the upcoming months are likely to present both increases and decreases as market dynamics evolve.
Colombelli also points to the seasonal pattern. With the return of summer, the Euribor trend appears to have stabilized toward a more predictable baseline. Month-to-month variations hover around a tenth of a percentage point, a signal of the ECB’s influence and a stabilizing effect on official rates. The data suggests a period of relative steadiness rather than dramatic swings.
There is speculation about the year ending with Euribor below four percent. Earlier predictions had suggested a closure around 4.5 percent by December 2023. Yet the current trend makes that forecast less certain. A small chance exists for a year-end reading under four percent, though most scenarios point to the rate staying in the mid-to-high threes. For homeowners facing payments, any move under four percent would be warmly welcomed, described by market observers as a potential early-year gift for mortgage holders.
One key factor behind the stabilization has been the ECB’s decision to pause further increases in official rates at its latest meeting. The current benchmark stands at 4.5 percent, with the last adjustment a 0.25-point rise in September. Most analysts expect no further hikes through 2024, though the inflation trajectory will determine the course of policy. The ECB’s next and final 2023 meeting, chaired by Christine Lagarde, is scheduled for mid-December and could influence near-term expectations. In the meantime, the region continues to monitor inflation trends and the pace of around-the-year price movements.
Looking at the longer arc, the historical pattern of Euribor alongside official rates suggests the peak of the current growth phase might be in view. The October monthly average rose to 4.160 percent, the highest since November 2008, underscoring the magnitude of the recent climb. The current stance, however, hints at the possibility of a gentler descent rather than a sharp drop, as analysts anticipate a more gradual trajectory compared with past surges in 2000 or 2008 when the scale of increases was much larger.
Industry insiders anticipate that the path of Euribor will be less volatile than in earlier cycles. The expectation is for a slower, steadier slide with extended periods of stability, rather than abrupt shifts that characterized previous episodes. That outlook aligns with the ECB’s cautious stance and the data showing inflation dynamics and growth prospects evolving in tandem. A calmer environment for rate expectations would help households plan more reliably, even as occasional spikes or reversals remain possible.
Wages continue to rise, though less than in 2022
Variable-rate mortgages typically carry quarterly, semi-annual, or annual review cycles. Those scheduled for a November annual review may still see higher payments, but the increases are notably smaller than those recorded at the same time in the previous year. This reflects the softer rise in Euribor and the gradual cooling of borrowing costs, even as the base rate remained elevated relative to pre-crisis levels.
To illustrate the impact, consider a borrower who took a €150,000 variable-rate mortgage for 30 years with a 0.99 percent spread in 2021 when Euribor was negative. That borrower would have faced a monthly payment around €448.98 at the outset. By October 2022, when Euribor stood at 2.828 percent, the monthly obligation rose to €691.35. With Euribor at 4.022 percent in the current cycle, the payment climbs to approximately €790.21 during the 2023 review period. That represents an increase of €98.85 per month, contributing to a total rise of over €340 per month over the past two years.
If the loan amount were larger, the impact would be more pronounced. For instance, a €300,000 loan under the same terms would see monthly payments swell from about €897.96 in 2021 to roughly €1,580.41 in the near future, illustrating how higher Euribor levels translate into meaningful cost increases for borrowers over time. These movements underscore the sensitivity of monthly obligations to the path of benchmark rates and the scale of the loan.