The recent sharp fall in the Euribor rate is providing significant relief to those with variable-rate mortgages, potentially saving them over €1,000 per year. This marks the most substantial reduction since 2013, driven by a shift in central bank policies towards lowering interest rates after a prolonged period of tightening to combat inflation.
Significant Decrease in Mortgage Payments
The Euribor, a critical benchmark for setting interest rates on variable-rate mortgages in Europe, has been dropping faster than expected. By the end of August, the average Euribor stood at 3.173%, reflecting a decrease of 0.353 points from July and a nine-tenths fall year-on-year—the most significant drop since March 2013. This reduction means mortgage repayments have seen a steady decline for five consecutive months, with the August adjustment potentially saving homeowners an average of €84.6 per month, or €1,015 per year.
Implications for New and Existing Mortgages
For those seeking new mortgages, this decline presents an opportunity to secure better loan conditions, as financial institutions adjust to the lower Euribor rates. Meanwhile, existing borrowers with variable-rate mortgages can expect a noticeable decrease in their monthly payments, easing financial burdens amid high inflation rates. The drop also alleviates the urgency to switch from variable to fixed-rate mortgages, given that repayments are likely to continue decreasing if the Euribor remains low.
Economists suggest that the trend may continue, with the possibility of the Euribor falling below 3% in the near future, provided there are additional incentives or favorable economic conditions in the coming months.
