How has the Euribor evolved in recent months?
The Euribor is an essential indicator to determine the installments of a variable mortgage, since today most mortgages are referenced to this index. If the Euribor rises, the mortgage payment is affected. The same happens if the Euribor goes down. In 2021 the Euribor has started with a new all-time low: it closed January at -0.505%.
This means that the mortgaged who have to review the loan, will experience a drop in installments. Thus, for example, in mortgages of 120,000 euros with a differential of Euribor + 1%, they will see their mortgage lowered by 157.44 euros per year, which means about 13.12 euros per month.
How has the Euribor evolved until January 2021?
The Euribor closed 2020 with -0.5%, so that the main index of variable mortgages registered a new all-time low and marking a milestone throughout its history. The benchmark index for variable mortgages has managed to chain up to five consecutive historical lows throughout the year to end up touching the barrier of -0.5%, the deposit rate established by the European Central Bank (ECB).
A moment that for many seemed like it would not come, but it has. Between October and November 2016, the index fell just 0.005%, the following year the variation was 0.009%, in 2018 the index rose 0.007% and in 2019 it registered a slight increase of 0.032%.
What happened in January 2021?
The year 2021 could not start better for those with a variable mortgage. And it is that this course begins as the previous one ended: with a new historical minimum of the Euribor, which is the index used to calculate the interest of the vast majority of these loans.
According to the banking comparator HelpMyCash.com, this reference will close the month of January with an average value below -0.5%; the lowest ever recorded. Therefore, those whose interest rate is revised in the coming weeks will notice a good reduction in their monthly payments.
The Mortgage Director of iAhorro, Simone Colombelli, has underlined the fact that the Euribor has started the year as it dismissed the previous one, marking a new all-time low, despite the fact that until now it seemed unthinkable that it would reach these levels. Along these lines, the Mortgage director appreciates an “imaginary barrier” at this -0.5%, as this is where the ECB sets its deposit facility rate.
What will happen during this year 2021?
In Colombelli’s opinion, it is unlikely to see the Euribor go much deeper and she believes that it would not make sense for it to fall to -0.7%. “It would detract from the market in the long run,” she stressed. “Everything seems to indicate that the situation for the Euribor will be very similar to what we have seen so far. We expect the mortgage index to remain in negative territory and stabilize without major changes, “said Colombelli. The benchmark index for variable mortgages thus shows the negative trend it is experiencing and which, foreseeably, will continue.
What type of mortgage should I take out, fixed or variable rate?
In these circumstances, people who are currently negotiating the purchase of a home and plan to sign a mortgage may wonder what the best option is. Experts agree that this is a good time to take out a fixed-rate mortgage. Why? Well, because it is a good way to ensure a fee with low interest forever. This is an unusual moment.
Are variable mortgages a good option right now? The answer is yes, if the person who is going to get a mortgage does not see the risk as a great inconvenience and, in addition, plans to repay the loan in a short period of ten or fifteen years.