The Euribor slightly increases in March 2024 to 3.718%
1 April, 2024 | Antonio Beltrán
The Euribor increased in March 2024 to 3.718%. This is a slight rise compared to February, which was 3.671%. A year ago, in March 2023, the Euribor was slightly lower than it is now, specifically at 3.647%.
This means that mortgages with an annual review based on March data will become more expensive, but not significantly so since the difference between the current Euribor and that of a year ago is less than half a tenth.
Mortgages reviewed semi-annually WILL become cheaper, since 6 months ago, in September 2023, the Euribor was above 4%, specifically at 4.149%. Now that the Euribor stands at a lower value than it did 6 months ago, mortgages with a semi-annual review based on the March value will have a more affordable monthly payment.
The Euribor is likely to remain virtually frozen for a few months, until there are signs of interest rate cuts by the European Central Bank (ECB).
Interest rates are kept at 4.5% by the ECB
The European monetary institution always acts with caution, although this caution can lead to delayed decisions. It took quite some time to lower interest rates when the economic crisis due to subprime mortgages burst at the end of 2007, although it eventually did so. It began in October 2008, a year after the start of the crisis, and gradually reduced the rates to 0%.
It now seems that it will also take some time to lower interest rates again, even though the economy is already cooling down in Europe and inflation has significantly decreased. In fact, Lagarde predicts that the CPI in the Eurozone will be at 2.3% this year and 2% in 2025.
At the latest ECB monetary policy meeting, which took place on March 7, 2024, it was decided again to keep interest rates at 4.5%. Therefore, we cannot add any more lines to the table we presented to you of the 10 increases ordered by the ECB during 2022 and 2023, which led to the spectacular rise in the Euribor.
The ECB wants prices not to increase by more than 2%
The caution with which the ECB acts is explained by its main economic mission: to keep the rise in prices (inflation) close to, but below 2%.
Its fight against inflation is always strict. And it will always do so, even if it means cooling down or slowing the European economy.
The institution decisively ordered interest rates to be raised during 2022 and 2023 in response to inflation in Europe exceeding two digits, as a result of the war in Ukraine and the Covid-19 pandemic.
The ECB now keeps interest rates at 4.5%, due to current inflationary pressures, which, according to ECB statements, are due to a strong increase in wages.
Interest rates will eventually go down
Although the ECB is very cautious, it will ultimately decide to lower interest rates, and the interbank market, which is mediated by the Euribor, is aware of this.
The ECB President already foresees inflation around 2% for 2024 and 2025. Therefore, prices are slowing down more quickly than expected, especially due to the retreat in energy prices.
With this positive data, it does not make sense to keep interest rates so high, at 4.5%, therefore, reductions in interest rates will be ordered and the Euribor will decrease. For now, it has already been below and away from 4% for four months.
Current Euribor
Here we show you the Euribor values from January 2023 to the present and how they have risen or fallen compared to the previous month.
The current Euribor data are as follows:
- An inter-monthly increase of less than half a tenth, specifically, 47 thousandths.
- An inter-annual increase of less than a tenth, specifically 0.071 points. Being a very insignificant annual rise, mortgages will only slightly increase in cost.
- A semi-annual decrease of 431 thousandths, resulting in a reduction in variable mortgages that are reviewed semi-annually with the Euribor value of March 2024.
Euribor Forecasts for 2024 and 2025
The forecasts of Bankinter’s analysis department remain unchanged. An estimate of 3.25% for this year and 2.75% for 2025 is maintained. For the department, it is clear that interest rates will be lowered by the ECB. It is the only way to achieve a Euribor below 3% for 2025.
Regarding much shorter-term forecasts, we believe that in the next month, the Euribor will likely be at a lower value than it is now, because the latest 12-month Euribor values are below 3.7%. Specifically, on March 27, the daily value was 3.684%, and on March 28, the last daily value of the month, it dropped to 3.669%.
In this way, probably in April 2024, the first reductions in the installments of mortgages that are reviewed annually with the Euribor value of April will occur, after more than 2 years of increases, many of them very substantial.
Mortgages with the evolution of the Euribor
We present to you a table with 6 example mortgages ranging from €50,000 to €300,000 in outstanding capital, and how the new Euribor value affects their monthly installment. All of them have a remaining term of 20 years and a 1% spread over the Euribor.
As we can see, the increase in mortgage installments is almost anecdotal. Even a mortgage with an outstanding capital of €300,000 sees its installment increase by just over €10.
A mortgage with an outstanding capital of €100,000, with a remaining term of 20 years and an interest rate of Euribor + 1% spread, will move from a monthly installment of €640.61 to €644.47 with the new Euribor value. This translates into a monthly installment increase of €3.86. All the above data are approximate.
Mortgage reductions are approaching
The significant increases in mortgage payments are now behind us.
Now it is expected that reductions will come.
The Euribor value for April may likely be the first to result in a reduction in mortgage installments during their annual reviews.
This will be very good news, especially after over 2 years of increases. Many of them were very steep, but that cycle has now ended.
As we’ve seen in several points of the current article on the Euribor, the outlook for citizens with variable-rate mortgages is going to be much better from now on.
