The 12-month Euribor leaves behind (apparently) the all-time lows. The mortgage indicator par excellence rose in March to -0.487% on average (in the absence of one session) and followed two monthly increases after the rebound in February, when it registered a rate of -0.501% after -0.505% in January. The index to which most variable mortgages in Spain are referenced seems to have started a slightly upward trend after remaining several weeks below the -0.5% threshold and hitting bottom just when it turned five years negative (the absolute record was -0.515% on February 2).
The index marks an average of -0.487% in March (in the absence of one session) compared to -0.501% in February and -0.505% in January
Experts assure that at -0.5%, which coincides with the deposit rate of the European Central Bank (ECB), is the floor of the Euribor, although it is not ruled out that it may cross that barrier again. However, at the moment in March, with only one session left to be listed, no day has touched that line, although it has touched it. The index has moved between -0.478% and -0.494%.
The Euribor has remained at negative levels since February 2016, supported by the different stimulus plans approved by the ECB. Market sources maintain that right now the indicator does not have a clear direction, pending the decisions of the central banks given the evolution of the economy due to the pandemic. In addition, markets are vigilant for the possible rebound in inflation. However, for the next few months, most analysts believe that the Euribor will continue to register values similar to the current ones.
Joaquín Robles, an analyst at XTB, highlights that “the Euribor has suffered a slight rebound due to fears of higher inflation.” It is an indicator, he explains, “closely linked to interest rates and, although these will remain at zero until at least 2023, strong economic growth or rising prices could tighten the ECB’s monetary policy earlier than expected. “.
Keep lowering mortgages
Despite the rise in the Euribor, mortgages may be calm for the moment, given that the Euribor remains well below a year ago, when the average stood at -0.266%, loans under review will continue to get cheaper. For an average mortgage of 150,000 euros, 25 years, with an interest of Euribor plus 1%, the monthly payments will be reduced by about 14.58 euros per month or almost 175 euros in the total for the year.
From the HelpMyCash portal they assure that “the rise in the Euribor will not make variable mortgages more expensive” and they foresee that they will become cheaper in the short term, “but in the long term it is more difficult to predict what could happen.” According to the Bankinter Analysis Department, its value will continue at levels similar to the current ones both in 2021 (-0.45%) and in 2022 (-0.42%).
If the economic situation in the euro area underwent a great improvement after leaving the pandemic behind, the ECB could raise its interest rates to contain inflation below 2%, which would push the Euribor higher. On the other hand, if the performance of the European economy were not so positive, the ECB would be forced to keep rates low to stimulate it, so this index would continue to trade at very low values, they predict from HelpMyCash.
Fernado Romero, from Abaco Capital, believes that the Euribor has already reached minimums and expects a strong economic recovery for the next 12 months, especially from the second half of this year, when the distribution of the vaccine has been extended by the majority countries and many of the current restrictions due to Covid have been lifted. “This economic recovery, together with all the expansionary policies that have been taken over the last year, we believe will cause a rise in inflation, which will increase this trend that began in February.”
In recent weeks, bond yields have risen and the US 10-year bond is at 13-month highs amid rising inflation to 1.4%. “” This situation has led investors to discount the possibility that the Federal Reserve could raise rates early in the event that inflation is above the 2% target. Although the situation in Europe is different, since inflation is at lower levels, it has also been affected by the possibility that interest rates may suffer an alteration, hence the appreciation of the Euribor, “says Robles.
After rising abruptly during March, April and May of last year due to the outbreak of the pandemic and the tension it unleashed in the interbank market, the Euribor resumed its declines due to the measures adopted by the ECB to face the Covid-19 crisis. The index marked six consecutive all-time lows from August 2020 to January this year, when the monthly rate pierced -0.5% for the first time. In February 2021 it ended that streak and rebounded, a rise that it has maintained in March.