Euribor fell in July: Mortgages become more affordable
The Euribor, a key reference for mortgages, experienced a significant drop in July. This means that the monthly costs for many homeowners with variable-rate mortgages are expected to decrease. The drop to the lowest point in a year and a half could result in an average annual saving of 777 euros for mortgage holders.
Relief for mortgage holders
For many homeowners with variable-rate mortgages, there is finally a positive turning point in sight. After a period of rising mortgage costs in 2022 and 2023, the trend now seems to be reversing. Inflation has moderated, and there are expectations that central banks will lower interest rates. In July, the Euribor closed at an average of 3.526%, the lowest level in a year and a half. This is a significant drop from 3.650% in June.
Financial savings for homeowners
A drop in the Euribor means that mortgage holders with variable-rate mortgages will pay less interest. For an average mortgage of 140,451 euros with a term of 23 years and a margin of one percentage point, this results in a monthly saving of about 64.8 euros, or 777 euros per year. In July 2023, the Euribor was still at 4.149%, which brought significantly higher costs for many households.
Broader economic impact
The lower interest rate not only provides financial relief for existing mortgage holders but can also stimulate consumption and investments, as households have more disposable income. Additionally, it reduces the risk of defaults and makes it easier for new buyers to obtain a mortgage. Banks often set a limit on monthly mortgage costs, meaning lower interest rates can give more people access to financing and revitalize the mortgage market.
Choosing between fixed and variable rates
The drop in the Euribor also affects the choice between fixed and variable mortgage rates. In May, 44.6% of new mortgage takers chose a variable rate, while 55.4% opted for a fixed rate, with an average interest rate of 3.25%. Choosing the right mortgage type can be challenging, as future interest rate developments are difficult to predict.
Outlook
With the Euribor at a lower level than in October, when it peaked at 4.160%, experts expect further declines in the coming months. The European Central Bank (ECB) has indicated it will closely monitor the data and consider further interest rate cuts. This could further lower mortgage costs and stimulate credit demand, which is beneficial for both homeowners and the broader economy.
