Mortgage payments in Spain only began to drop with the Euribor in April. That is the horizon drawn by analysts who hope that from now on the index used to calculate the monthly amount of mortgages will begin to stabilize and moderate. This Monday the closing of the Euribor for the month of June at 4.15% was confirmed, a level not seen in 15 years.
That means revisions through March will be upward even though the index is likely to stabilize. The reason is that the fee change is made in comparison with the Euribor of 12 months ago. And in 2022 it was well below the current level. Just a year ago in July 2022, for example, it was 0.9% and last month it was above 4%.
Therefore, it will not be until next April when a slight moderation of the Euribor is expected to 3.70%, the index will be below the level of April 2022: 3.72%. And from that moment on in the following revisions it will also go down.
The CEO of CaixaBank himself, Gonzalo Gortázar, explained on Friday in Valencia that on that day the expectations of investors anticipated that first future drop in quotas after months of increases.
Adrià Morron, an economist at CaixaBank Research, explains that these expectations about where the Euribor will be in the coming months are built with the prices of products linked to interest rates. “Right now the market is speculating that at some point in 2024 rates could be lowered somewhat,” he adds. Currently the ECB deposit facility rate (the rate at which the ECB pays for deposits deposited there by banks) is 3.75%. This is the one that the market uses to estimate the Euribor. The credit facility is not used (the type that is paid for requesting money from the ECB) which is at 4.25% because there is so much liquidity that it is not necessary to go to the Central Bank to obtain money with which to lend, explains Morrón .
That expected reduction in eight months is only the majority expectation of investors but it is not – far from it – a certainty. The professor of Economics at the Pompeu Fabra University (UPF), José García Montalvo, believes that expectations go along two different lines. A group of investors believe that the maximum rate level has already been reached and, therefore, they are buying 5- and 10-year bonds to ensure a good return. The second group -adds Montalvo- is that of investors who believe that rate hikes will accelerate, which will leave the first group of investors trapped.
“Banks opt for the first option and are now betting on mixed mortgages,” says García Montalvo. The idea they sell is that the rates will remain high for about five years while the mortgage is fixed and then when they become variable, the Euribor will drop to the low levels of recent years. García Montalvo warns that he sees it as more likely that the Euribor will be at the levels of the last 20 years when it was well above the low percentages prior to 2022.
The rise in Euribor to 4.15% in July places the theoretical increase in mortgage payments at around 250 euros for a 30-year loan of 150,000 euros with a differential of Euribor plus 0.5%. In reality, the increases are usually smaller because many of the mortgages are already quite advanced in their repayment period, which reduces the impact of the rise in the Euribor.
