Euribor Continues Downward Trend: What It Means for Your Mortgage
The 12-month Euribor, the principal benchmark for calculating variable mortgages in Spain, has continued its downward trajectory, closing at 2.081 in May. Experts suggest that this trend may lead the rate below 2.0 if the European Central Bank (ECB) implements further interest rate cuts in their upcoming meeting on June 5.
This recent closing marks the fourth consecutive decrease in May, albeit a moderate one compared to April's closing rate of 2.143. Notably, this year-on-year decline represents the most significant drop in sixteen years, with the Euribor recorded at 3.680 in May 2024—16 percentage points higher than the current value. This substantial reduction translates into potential annual savings of approximately 1,500 euros for those revisiting their variable mortgages.
For an average mortgage of 150,000 euros over a 25-year term, based on a 1% interest rate above the Euribor, monthly payments could see savings of about 132 euros, equating to over 1,500 euros in annual savings. For a larger mortgage of 300,000 euros under the same conditions, the savings could rise to 263 euros monthly, or about 3,100 euros annually.
Joaquín Robles, an analyst at Banco BiG, noted in a statement to EFE that the trajectory of the Euribor largely hinges on any interest rate cuts from the ECB. Although there was no meeting in May, another cut of 25 basis points, the eighth consecutive one, is anticipated, which could place the deposit facility around 2.0%. Robles theorized that the Euribor is already reflecting the likelihood of this adjustment and perhaps even anticipates a pause in the cuts later in the year. He expressed optimism about the indicator potentially dipping below the 2.0 threshold as early as this summer.
Simone Colombelli, the director of Mortgages at iAhorro, echoed these sentiments, noting that while the Euribor is gradually descending, it continues to face resistance at the 2.0 barrier. Should the ECB decide to cut rates again in June, Colombelli believes that a decline below 2.0 is almost guaranteed by the end of the month. He emphasized that even if rates remain steady, the Euribor is expected to continue its fall. Currently, the Euribor sits 0.169 percentage points above the official interest rates of 2.25%. Should the ECB lower rates by 25 basis points, it would then be below the current average value of the Euribor.
In contrast, Gustavo Martínez, a finance professor at Francisco Marroquín University and market analyst, conveyed a cautiously optimistic outlook for the Euribor's trajectory through the end of 2025. He indicated that while the indicator is likely to remain between 2.0 and 2.1, any unexpected inflationary pressures or economic shocks could alter the landscape.
Martínez suggested that, barring any geopolitical or economic disturbances, the Euribor should stabilize at moderate levels until the year concludes. However, he cautioned that remaining vigilant amidst ongoing geopolitical and economic tensions remains crucial.
In summary, those with variable rate mortgages in Spain stand to benefit significantly from the current trends in the Euribor, particularly if the ECB follows through on expected interest rate cuts. As the situation evolves, staying informed will be key for homeowners looking to optimize their mortgage payments.
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