Euribor tops 3% and variable mortgages are feeling it
Euribor has now climbed above 3% and forecasts point to further rises, with 5% possible by 2027. The impact on variable-rate mortgages and inflation.
English · Original discussion in Spanish · Published
Euribor tops 3% and variable-rate mortgages face their final stretch
Anyone who locked in a fixed mortgage at 1.25% in 2020 is walking around with a smile today: those whose loans depend on Euribor are already seeing it above 3%, and the trend, according to circulating forecasts, is toward further increases. Some estimates point to 3.5% in the short term; 3.8% is not ruled out, and some even see 5% by 2027.
The double squeeze: inflation and monthly payments
The problem is not just the monthly payment. Inflation keeps eating into wages and, on top of that, mortgages are getting more expensive. With diesel 100% more expensive and an energy dependence that some analyses describe as "systemic", the storm could be worse than the 2008 one, which was limited to real estate and its financing.
The stampede toward fixed rates
The predictable rush to the bank to switch from variable to fixed rates is beginning, although at 2.5% it no longer seems such a good deal. With Euribor heading toward 3.5%, maybe it does. But interest rates will keep rising as long as inflation doesn't ease, and deficit-reduction policies are looming in the EU. The countdown to fiscal orthodoxy has begun.
The real comfort belongs to those who have already paid down their loans or locked in low rates: they are watching the movie from the stands. Meanwhile, the forecast that unsettles most is not the 3.8% of the moderates, but the 5% that some place in 2027: if it materializes, the average payment on a variable mortgage will become a structural problem, not a rough patch.
Anyone who locked in a fixed mortgage at 1.25% in 2020 is walking around with a smile today: those whose loans depend on Euribor are already seeing it above 3%, and the trend, according to circulating forecasts, is toward further increases. Some estimates point to 3.5% in the short term; 3.8% is not ruled out, and some even see 5% by 2027.
The double squeeze: inflation and monthly payments
The problem is not just the monthly payment. Inflation keeps eating into wages and, on top of that, mortgages are getting more expensive. With diesel 100% more expensive and an energy dependence that some analyses describe as "systemic", the storm could be worse than the 2008 one, which was limited to real estate and its financing.
The stampede toward fixed rates
The predictable rush to the bank to switch from variable to fixed rates is beginning, although at 2.5% it no longer seems such a good deal. With Euribor heading toward 3.5%, maybe it does. But interest rates will keep rising as long as inflation doesn't ease, and deficit-reduction policies are looming in the EU. The countdown to fiscal orthodoxy has begun.
The real comfort belongs to those who have already paid down their loans or locked in low rates: they are watching the movie from the stands. Meanwhile, the forecast that unsettles most is not the 3.8% of the moderates, but the 5% that some place in 2027: if it materializes, the average payment on a variable mortgage will become a structural problem, not a rough patch.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (10 replies).
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