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Posts Tagged ‘euribor’

Euribor interest rate decreases

The decline of the interest rates from 1.5% to 1.25% by the European Central Bank to improve the economy in the Euro zone, is having results.

This measure meant a sharp decrease on the Euribor rate. This is the main reference index for mortages in Spain, and this rate, tightly linked to the public interest rates, usually follows the general trend.

The Euribor decreased from 2.105% to 2.044%. This is the lowest since April. This move makes the Euribor ore similar to the Euro zone interest rate.

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Euribor interest rate

Euribor -the rate indicator that is linked to more than 4 million mortgages in Spain- goes down to 2.067 % by 30  September 30, 2011, but is still higher than September 2010 in 0.647 points.

This fact negatively affects the mortgages as it increases the monthly payment. If we take in consideration an average 20 years mortgage of 120.000 Euros with annual review in September, it will be affected with an increase in the monthly fee in about 37.29 Euros, equivalent to an annual increase of 447.48 Euros.

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Upward trend of the euribor interest rate

During the first few days of the current year, experts in the financial field have started to release their forecasts in worldwide indicators, and the Euribor -the main reference of the vast majority of mortgages in Spain- has started the year by showing a modest increase, which will place it between 1.75 and 2%. This figure represents about half a point above the 2010 level (1.526%).

If we translate this data into the average mortgage payments, we find an increase from 130 € up to € 350 per year if we assume a hypothetical scenario of Euribor reaching 2%.

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the Euribor trend has changed from August 2010

The Euribor rate –main Spanish mortgages reference index- closes October 1,495%. This is a slight increase compared to the rate in September 2010, which was 1.420%. This information has been issued by Banco de Espana, the National Spanish Bank.

While mortgages recalculated with Euribor rates from January to July 2010 saw their monthly instalments reduced, mortgages revised with Euribor rates from August to October will see their monthly payments increased.

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Mortgages in EUR: a safe choice for EUR earners

Foreign currency mortgages are a high-risk investment out of the GBP-EUR circuit. The Spanish Consumers and Users Association (OCU in Spanish) confirms through a study that these mortgages have translated into great losses for their holders. A good example of this is the JPY-based mortgages for EUR earners: Their mortgages have increased a 25% on the last year.

The risk of foreign currency mortgages resides in the currency fluctuations, more significant than the changes on internal interest rates. The OCU accuses financial institutions of misleading clients by omitting information and not mentioning that the continuous revaluation of the EUR could only mean a high risk of later devaluation.

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