It’s the first good news in months. The development of European interest rates in August reinforced signs that the rally, at least in the longer term, may be coming to an end. But it is still too early to take this fact for granted, especially since the six-month Euribor rate was set on Thursday at a new maximum of approximately 15 months, and the impact on housing installments will remain negative, with further increases to come. Months . .
Average interest rates in August, values that are used as a reference for new loans to families and businesses and for contract reviews that take place in September, fell slightly over 12 months, remained practically unchanged over six months, and rose over three months.
The 12-month Euribor average was 4.073%, 0.076 percentage points lower than the 4.149% recorded in July. The six-month period was 3.944%, just 0.002 points above the previous month’s 3.942%. In three months, the trajectory is still bullish, reaching 3.780%, up 0.108 points from 3.672% in the previous month.
In the long term, this is the first decline since December 2021, when this rate was still negative (-0.502%), after reaching the first positive value in April 2022 (0.13%), the date from which the rate of rise began. accelerated.
The reflection of the August average on loans to be reviewed in September is still far from positive, considering that the most recent revisions were based on lower values. The biggest difference can be seen in the 12-month Euribor-linked contracts, which were last reviewed a year ago, at a much lower rate of 1.249%.
The premium increases by 12 months
Credit simulation due to be reviewed in September of €150,000 for 30 years linked to Euribor for 12 months (4.073%) plus 1% spread (or an additional margin applied depending on the risk of the operation), will correspond to a premium of 811.94 EUR. This amount represents an increase of 238.65 euros compared to the amount paid last year, which would have been 573.29 euros. The new payment will remain in place until the next review, scheduled for September 2024.
Using the same simulation for a six-month Euribor-linked loan, the premium rises to €800.11, €72.26 more than the previous value. The smaller increase is explained by the fact that the last revision took place half a year ago, in March this year, with a February average of 3.135%.
In the case of the three-month Euribor, the increase in the interest rate in August was the most significant, but the effect on premium was less, which is explained by the fact that the revisions occur at shorter intervals. With August values, keep the same amount, duration and spread From the previous simulations, the premium rises to €785.19, just €36.53 more than the €748.66 paid in the previous audit, which took place in June.
Higher premiums represent a significant increase in the amount paid for interest and a decrease in the amount of debt amortized per month. For example, a premium of €811.94 (simulated with 12-month Euribor) corresponds to €634.13 interest and €177.81 principal.
In the hands of the European Central Bank
Signs of stabilization are positive for those who have applied for or will apply for housing credit, but current levels are high, corresponding to the highest levels since November 2008, and expectations for significant downward movement in the coming months are low.
The behavior of the rates used in the vast majority of housing loans in Portugal is explained by the change in the rhetoric of the European Central Bank (ECB), which admits that there may be a pause in the rise of the main interest rates, which will be decided at the September meeting. Although a new increase, in the range of 0.25 percentage points seen in recent meetings, has not been ruled out, the scenario left open represents a significant change compared to the interest rate movement that began in July last year.
But nothing is guaranteed at this level, especially since the ECB continues to maintain its inflation target of 2%, which is still far off.
Eurostat’s preliminary estimate, released on Thursday, reveals that annual inflation in the Eurozone remained stable in August compared to July, at 5.3%, well below the 9.1% year-on-year level, but still at a high level.
