The Bank of Spain already includes a rise in Euribor to 4.5% in its forecasts

The Bank of Spain already includes an increase in Euribor to 4.5% in its forecasts. The index, which measures mortgage payments, closed in February at 3.5%, and its daily price even exceeded 3.8% in recent days.

Governor Pablo Hernández de Cós included in a speech on Tuesday the possibility of raising the interest rate by five basis points from the -0.5% that the Euribor was listed at in early 2022.

Until now, the institution’s public projections did not include an increase of more than 4 percent. An increase which, according to the Bank of Spain’s own calculations and as reported by el Diario, will drown almost 15% of mortgage-burdened households.

This percentage of households facing a “high net financial burden”, according to the institution, will exceed this 15% based on the new expectations. It is currently supported by more than 35% indebted households with lower incomes and 25% by the next income group, according to the same exercise. In the case of the richest families, only 3% drowned.

Economic theory considers “high” debt to be one that exceeds a third of household income. Above this limit, the risks of non-payment increase. Something common, on the other hand, in the housing rental market in big cities.

3000 euros more per year

Families who recently renewed their variable-rate mortgages paid from around €534 a month to around €830, up €3,000 a year, on average assuming INE collects a €150,000 loan over 25 years. with a 1% differential against Euribor. Three out of every four mortgaged homes are on variable interest rates.

The hit in these cases is direct, as Euribor was trading negative in February 2022, exactly at -0.335%. But families who sign up for a mortgage today, or change it from variable to fixed, will also experience this increase in funding as the government tries to help with measures that, however, have been scarce.

In the Council of Ministers this Tuesday, Calvino announced that he will meet with the banks on Thursday to discuss the application of the three codes of good practice adopted last year and the possibility of taking additional measures or making changes. Among them is a framework of recommendations for households with variable rate mortgages and those affected by rising interest rates.

ECB rate hike

Euribor is trading in anticipation of an official interest rate hike by the European Central Bank (ECB). At the moment, at the meeting of the governing board on March 16, there is an increase of 0.5 points to 3.5%. Growth started from 0% in July.

In the minutes of the last meeting of the Governing Council of the ECB, doubts arose for the first time among its members. [que conforman el principal órgano decisorio de la institución] on the aggressiveness of raising official interest rates to fight inflation. A strategy aimed at “cooling” the economy and hurting household consumption or companies’ investment opportunities. And this takes into account the risk of economic recession and rising unemployment.

But this week, one of the most “hawkish” members of this governing board (as they call the most aggressive positions in monetary policy jargon), the governor of the Austrian National Bank, called for an increase in interest rates. The interest rate is two. More points in March, May, June and July by 0.5 points.

Source: El Diario





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