Mortgage rates in Spain show a cooling sign as February closes. With one day left in the month, the Euribor-linked index that affects roughly five million mortgages is expected to average 3.666% for February. This would be higher than January’s 3.609% and would break the downtrend that began after a high of 4.16% in October. Still, consumer loans that adjust annually and reference February’s figure (typically updating installments in April) will see the mildest rise since the period when January 2022’s Euribor was in use, while those with semiannual resets (about 30% of total) will enjoy the third consecutive cut in their payments.
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The Euribor fell notably between November and January as markets priced in the possibility that the European Central Bank would need to accelerate the easing of official rates due to the euro zone’s weakening economy and faster-than-expected inflation cooling. Yet, the central bank has lately convinced investors that the start of cheaper money will likely come in the summer rather than in spring. This stance is echoed in daily Euribor figures, which began February near 3.5% and finished around 3.75%.
Movements up and down
Despite the Euribor’s uptick, annual-rate payments will continue to ease for many borrowers. Take a €150,000 mortgage over 24 years, with a Euribor-based rate plus a 1% margin referencing February data. The monthly payment would rise from €855 to €866, a jump of €11 per month and €132 per year. For a €300,000 loan under the same terms, the increase would be from €1,711 to €1,733, adding €22 each month and €264 yearly. In contrast, for those with semiannual resets, payments could drop from €901 to €866 and from €1,803 to €1,733 in the two example loans.
The impact of higher or lower Euribor readings will depend on the chosen reset period. Annual reset loans tend to rise when the reference Euribor is higher than the year-ago or six-month-ago level in the month the loan is revised, and fall when it is not. The moderation in payment increases, even with February’s small uptick, stems from comparing current Euribor levels with those recorded in February and August 2023 (3.534% and 4.073%). Last year, Euribor started January at 3.337%, peaked at 4.16% in October, and then eased to about 3.679% in December.
When comparing with February of the previous year, the year-over-year gap used for annual-rate loans will be 0.1326 percentage points, the smallest since January 2022. For semiannual loans, the drop versus Euribor from last August will stand at 0.4064 points. To put this in perspective, the year-over-year differences reached as high as 3.884 points in March of the prior year.