The Euribor is shot. The index to which most variable-rate mortgages are referenced closed the month of June at 0.852%, the highest since August 2012, and has been positive for three months, for the first time since January 2016. The current situation suggests that the euribor will continue to rise in the remainder of the year and may stand at 1.5% at the end of the year. This rise means that the mortgages granted have moderated, although there are still larger amounts than a year ago.
According to data from the Bank of Spain of Household Financing Indicators, In the month of May, mortgages were granted for a value of 516.7 million euros, which is 1% more than a year ago. However, this growth of 1% is lower than that registered in April compared to the previous year, since mortgage loans granted increased by 1.2%.
The 516 million for housing granted in May represent half a million less than those that were granted in April (the first month with the positive Euribor), which It was the highest peak so far this year and in 2021 (monthly data) with a total of 517.2 million euros.
One month is not enough to talk about a marked trend. For this reason, Carlos Balado, professor at OBS Business School and director of Eurocofin, explains that despite the slowdown, mortgage loans will continue to rise, but at a more sustained rate than that recorded last year. And it is that this slowdown is not only due to the rise in rates that is already reflected in the Euribor (although it has not yet occurred) but also in the increase in housing prices.
The average price of newly built housing increased by 6.4% until June in Spain and stood at 2,641 euros per square meter, according to the Real Estate Sector Trends Report published today by the Appraisal Society. “These increases can bring forward purchase decisions,” Balado points out, because, although the Euribor is rising, 75% of new mortgages are made at a fixed rate “which until now have been at very attractive levels, the lowest that had been never registered before and this encourages demand”.
The professor insists that despite the Euribor rising, interest rates continue at a low level, to which must be added the accumulated savings. For this reason, Carlos Balado assures that there will be sustained growth in mortgage credit, compared to the previous year.
As far as total credit is concerned, in May, loans were granted for 702.2 million euros, which is 1.3% more than a year ago, but slightly less than one million more than in April when loans were granted for 701.5 million euros. Beyond mortgage loans, we must highlight consumer loans that grew by 4.4% compared to the previous year to 92.2 million euros. In this area, there has also been a slowdown compared to April, when consumer loans accounted for 92.94 million euros.
Euribor, highest monthly rise
The 12-month Euribor closed the month of June at a monthly average of 0.852%, compared to 0.287% in May and -0.484% a year earlier, which will mean the largest monthly and year-on-year rise in its history, in addition to its highest level since August 2012.
The index to which the majority of mortgages in Spain are referenced marked a dozen daily data in June above 1%, which had not happened for more than a decade, although finally the monthly average has been below said dimension.
The new jump of the Euribor will imply an increase in the monthly payment of those who have to do the annual revision of their mortgage at a variable rate. Specific, a 30-year variable mortgage of 150,000 euros and with a differential of Euribor +0.99% will suffer an increase in their monthly mortgage of 90.28 euros or, what is the same, 1,083.36 euros per year. If the amount of the loan were 300,000 euros, with the same conditions, the increase in the monthly fee would be 180.55 euros, so the mortgaged person would pay 2,166.6 euros more per year.
The indicator has been boosted by the announcement that the European Central Bank (ECB) will raise interest rates from 0% to 0.25% in July, while a new rise will take place in September that could raise rates to 0 .75%. The experts, who a few weeks ago did not expect the Euribor to reach 1% until the end of this year, are already updating their forecasts.
Thus, the Bankinter Analysis Department predicts that the 12-month Euribor will reach 1.9% in 2022 and 2.20% in 2023, later moderating to 2% in 2024. For its part, Asufin believes that its value will be 1.50% in December 2022 and 1.9% in 2023.
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