Largest drop in Euribor rate since 2013 brings relief to mortgage holders in Spain

The recent downturn in the Euribor rate has provided much-needed relief to mortgage holders across Spain, with savings of over €1,000 per year for many homeowners. This is the most significant drop in the Euribor since 2013, resulting in five consecutive months of reductions in mortgage payments, although the current decrease is far more substantial than usual.

The economic strain that many mortgage holders may have felt over the summer could be partially offset by this favourable development in the Euribor, which has maintained a downward trend throughout August. For those with variable-rate mortgages due for review post-summer, this drop means a significant reduction in interest payments, as reported by Cinco Días.

In annual reviews, the August Euribor figure will lead to the largest drop in mortgage payments since March 2013. This is also good news for prospective mortgage borrowers, who can now secure better terms. With central banks shifting their focus towards lowering interest rates after nearly two years of tightening to curb inflation, the Euribor has started to decline faster than analysts predicted. As of yesterday, two before the end of August, the average Euribor stands at 3.173%, which is 0.353 points lower than in July, a month that already saw a decline.

Year-on-year, the Euribor has dropped by nine-tenths of a percentage point, the most significant decrease since March 2013. While mortgage payments have been dropping for five months straight, this current reduction is particularly noteworthy.

For a typical mortgage (€140,451 over 23 years, according to 2023 data from the National Institute of Statistics) with a one-point differential, the August review of the Euribor could save borrowers €84.60 per month, or €1,015 annually.

Expert Insights on the Euribor Decline

Patricia Suárez, president of Asufin, notes, "This is undoubtedly good news for mortgage holders, who are starting to feel some relief after the steep increases experienced in previous reviews, particularly in 2023." Last year, rising interest rates led to Euribor increases of over three percentage points, surpassing the 4% mark for the first time in 15 years, placing a significant burden on many families amidst high inflation.

As for the debate between choosing a fixed, variable, or mixed mortgage, Asufin advises that those with variable-rate mortgages are no longer under pressure to alter their terms, as their debt will decrease as their mortgages are reviewed with the lower Euribor rate.

Future Expectations for the Euribor

Currently, Euribor's daily rate stands at 3.119% and could soon fall below the 3% threshold, although it may require additional incentives in September to do so. Throughout August, factors such as recession fears in the United States and the possibility of central banks lowering rates more quickly than expected have contributed to the Euribor's decline.

Economist Javier Santacruz explains, "Two key factors are at play: the recent rate cut by the ECB a couple of months ago, and the clear indication from the United States to lower rates before the elections."

The rapid drop in the Euribor has been quicker than the forecasts of institutions like Bankinter, which had predicted the index would reach 3.50% by December. However, Leopoldo Torralba, an economist at Arcano, suggests that the Euribor's current trajectory aligns with a period of high uncertainty. "It's normal for expectations of future declines to accelerate at some point, dragging the Euribor down with them," concludes Torralba.