Euribor falls by almost half a point in two days, from 3.9% to 3.5%, after the collapse of the Silicon Valley bank.
The main impact of the Silicon Valley bank collapse for households, for now, comes through Euribor. The index by which mortgage payments are calculated fell almost half a point in two days, from 3.9% to 3.5%, amid an uncertain scenario in which central banks, both the United States Federal Reserve. Like the European Central Bank (ECB), it may be forced to reconsider its strategy of raising official interest rates to fight inflation.
The financial turbulence of the last few hours is the first big scare of this aggressiveness of raising the “price of money” by central banks. And Euribor, which transmits the ECB’s decisions on interest rates, even fell to 3.534% at the end of February on a daily basis.
As of this month of March, this fall is already a boon for households burdened with variable-rate mortgages who renew next month. Either for those who sign a new loan or those who change it from a variable to a fixed one, as the government tried to help with measures that were, however, meager.
According to Euribor data for February, households renewing their variable-rate mortgages during these weeks will pay between around €534 a month and around €830, up €3,000 a year, for the average assumption collected by the INE. A loan of €150,000 over 25 years with a differential of 1% on Euribor.
The hit in these cases is direct, since in February 2022 the index was negative, -0.335%. But it may include next month.
Changing priorities of central banks
The decline of Euribor reflects that if yesterday the absolute priority of central banks was inflation, and in order to reduce it in recent months they tried to suppress the consumption of households and companies that need financing, today it is the priority. Central banks have become financial stability.
Not that the scenario has progressed to the point where interest rate cuts from the ECB or the Federal Reserve are expected, but there is still a softening of the aggressiveness of recent months.
The ECB’s governing council meets this Thursday and will in principle announce an increase in the official money “price” by another 0.5 basis points, from 3% to 3.5%, as promised. Although it could change the discourse in the coming months and include a message that makes us think about the end of monetary policy tightening.
“Another paradox of our time. The one who will finally stop the rise of interest rates will not be the fall in inflation, but the instability of banks and financial institutions”, reflected Carlos Martin Uriza, Director of the CCOO Economic Cabinet.
“Unless the ECB’s monetary hammer, designed to dampen demand, serves to tighten the screws on supply-side inflation. [relacionada con la energía, o con los cuellos de botella en el comercio mundial]Its efficiency is now even more affected by financial stability,” concludes this expert.
Source: El Diario
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