THE INDEX STARTS DECEMBER WITH SHARP DECLINES AND FALLS TO MAY LEVELS

ELECONOMISTA.ES

The twelve-month Euribor, to which most variable-rate mortgages are referenced, stands at 3.794% on Monday, December 4, 2023, the lowest level since last May. The index is below the 4% barrier for the fourth consecutive day. Experts and futures point out that in December the figure may consolidate below this level, for the first time since May.

December has all the cards to become the month of confirmation of the fall of the Euribor. The index has registered a sharp decline in its rate today, falling by 2.767%, 10.8 basis points. This is the biggest drop since last March, when the banking crisis broke out in the US. Today's drop means that the Euribor is at its lowest since last May.

Last week's inflation data in Europe have spurred the latest falls in the Euribor. But the trend comes from November, after the ECB slowed down rate hikes at its October meeting.

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What will happen in 2024?

Pressure is mounting for the ECB to make the first rate cut sometime next year. Experts anticipate that the index will begin to fall to around 3% by the end of next year, so, although it will continue at higher values than in recent years, it is expected to moderate little by little throughout 2024. Meanwhile, Euribor futures are intensifying the cuts in the future. For maturity, in March 2024 it has gone from last week to 3.85% to 3.68%. By the end of 2024, futures point to the Euribor falling to 2.68% from 3.07% last week.

However, the fact that the Euribor is gradually moderating does not mean that mortgage payments will immediately fall, since variable-rate mortgages are usually reviewed every six or twelve months. To notice a reduction in the quota, the Euribor will have to fall below the level reached last year in the same month or six months ago.

If last year 2022 with the December Euribor (3.018%) the monthly payment was 669.84 euros, with the Euribor above 3.8%, the mortgage payment will continue to rise to 692.35 euros, a difference of 22.51 euros. Experts estimate that mortgages will not notice the fall in the Euribor until March or April 2024.

How is the Euribor calculated?

The Euribor is called the European InterBank Offered Rate and is calculated through a panel of European banks that report every day at what rate interbank loans are made. As of 2020, calculations are carried out in a hybrid way. The data from the panel is included, but also the market's own estimates, with the aim of reducing the volatility and risk of manipulation, to which these indices were subjected at the beginning of the century.

The panel is made up of 18 European banks, including Santander, BBVA, Barclays, Deutsche Bank and Unicredit.

Every working day at eleven o'clock in the morning, it is published at the average interest rate at which financial institutions lend capital for one week, one month, three months, six months and 12 months.