The Euribor closed last March with an average value of 3.647%; much higher than that of the same month of 2022 (-0.237%). It is its highest record since 2008, but forecasts at the beginning of the year suggested that the price of this index would be higher at the end of the first quarter; around 4% or above. The upward trend of the Euribor, however, was interrupted in mid-March due to banking instability caused by the bankruptcy of Silicon Valley Bank and the collapse and subsequent sale of Credit Suisse.
After the apparent stagnation of the Euribor, those mortgaged at a variable rate are now wondering if this index will remain relatively stable or if, on the contrary, it will continue to rise and make their monthly installments more expensive. According to the financial comparator HelpMyCash.com, the near future of this mortgage reference is uncertain, since its evolution will depend on the inflation trend in the euro area and the progress of the global banking situation.
The analysts of this comparator consider that there may be three possible scenarios. In the first, they start from the hypothesis that inflation in the euro zone will remain high in the coming months and that, furthermore, the European and global banking situation will stabilize and overcome the problems faced by financial institutions in mid-March.
In this case, the European Central Bank (ECB) will keep its rates rising, since it will need to raise them to combat high inflation. He will probably increase them by 0.25 percentage points at his meeting on May 4 and by 0.25 points more on June 15, so his main interest would close the second quarter at 4% (now it stands at 3.5 %).
The Euribor, as a general rule, is usually between half a percentage point and one percentage point above the ECB interest rate, although this margin is usually lower when the European supervisor moderates its rate hikes. Consequently, in this scenario, HelpMyCash believes that the Euribor will trade between 4% and 4.5% at the end of the second quarter of 2023.
The second scenario considered is also based on the hypothesis that inflation in the euro zone will remain high in the coming months, but that banking entities will experience moments of instability due to the bankruptcy of a European or North American bank or due to rumors of bankruptcy of any financial. In this case, it is very likely that the European Central Bank will not raise its rates or that it will increase them only slightly so as not to create more problems for the entities of the Old Continent, which would place its main interest at 3.5% or 3, 75%
The Euribor, if this scenario occurs, will stagnate in the coming months or rise moderately. According to HelpMyCash, in the event that inflation remains high and the banking situation is unstable, this index will close the second quarter with a value of between 3.5% and 4%.
Finally, it may also happen that inflation in the euro area falls considerably as a result of the latest rate hikes carried out by the European Central Bank. In such a case, this body will probably stop raising its rates and will maintain its main interest rate at 3.5%.
In this scenario, according to the comparator analysts, the Euribor will remain stagnant or drop slightly. It will probably end the second quarter with a value of around 3.5%; similar to that registered during the first two months of this year.
For those who already have a variable mortgage, the first scenario would be the most detrimental, since their installments would become significantly more expensive if their interest rate were revised during the second quarter of the year. With the second and third, on the other hand, they would lose less: their monthly payments would rise because the value of the Euribor would be higher than before the update, but the rise would be less abrupt.
And what about those who plan to sign a mortgage in the coming months? According to HelpMyCash, since it is not possible to know what the evolution of this index will be in the short and long term, the future mortgaged person must assess whether he prefers to bet on the stability of a fixed interest or if, on the contrary, he is willing to assume more risk with a Variable rate to pay less if the Euribor falls in a few years.
If you prefer the security of a fixed rate, it is advisable to contract a loan with an interest rate of less than 3%. In this sense, the BBVA Fixed Mortgage, from 2.80% for direct deposit of the payroll and contracting two insurances (life and home), can be a good option. On the other hand, if you want to bet on a variable rate, the ideal is to look for offers with a differential of less than 0.70% (the average differential of the market). The EVO Banco Smart Mortgage, for example, meets this requirement: it has interest from Euribor plus 0.48% (2.20% for the first two years) for direct debiting the payroll and taking out home insurance.
