House mortage rises sharply compared to the latest revisions

01 Aug 2022 min de leitura

Mortgage payments made by bank customers in mortgage loans will increase sharply in August in contracts indexed to Euribor at 3, 6 and 12 months compared to the latest revisions, according to simulations by Deco/Dinheiro & Direitos.

Euribor 6 months

A customer with a loan of 150,000 euros with a term of 30 years, indexed to six-month Euribor, with a spread (bank's profit margin) of 1%, will pay 515.24 euros as of this month, which means a increase of 68.36 euros compared to the last revision in February.

Euribor 3 months

If the loan conditions are the same (amount and repayment period), but linked to a three-month Euribor, the customer pays 485.01 euros, 38.72 euros more than what he has paid since May.

These values are calculated from the average of the Euribor for July, which is 0.466% at six months and 0.037% at three months.

Euribor 12 months

As for the twelve-month Euribor-indexed loan, as of August, the mortgage payment (for loans under the aforementioned conditions) will be 553.83 euros, an increase of 104.45 euros compared to August 2021. In this case, it was considered in calculating the value, the average Euribor for July, which was 0.992% over 12 months.

The evolution of the Euribor rate is closely related to the rise or fall of the European Central Bank (ECB) key interest rates.

After several years in the negative, the Euribor started to rise significantly since February 4, after the ECB admitted that it could raise its key interest rates this year due to rising inflation in the eurozone.

An interest rate hike by 50 basis points was announced at the July 21^st meeting.

This increase, decided by the European Central Bank, which covered three key interest rates, was the first in 11 years, and aims to contain inflation. The ECB also said it would continue to raise interest rates at upcoming meetings.

The SIX-month Euribor rate most used in mortgage loans in Portugal has been negative for 6 years and 7 months (between November 6, 2015 and June 3, 2022).

On July 14^th, the three-month Euribor enters positive territory for the first time since April 2015.

The twelve-month Euribor became negative on February 5^th, 2016 and has been positive since April 21^st.

What is the Euribor rate?

The Euribor rate is the main index in Portugal in bank contracts that finance the purchase of a house. The six-month Euribor is the most used, followed by the three-month rate.

Euribor is determined by the average rate at which 57 eurozone banks are willing to lend money to each other on the interbank market.

Adapted from: Idealista