Euribor falls half a point in a week due to financial volatility

The fear of a new financial crisis wins the pulse, at this point in time, for the avenues sought by central banks to combat inflation and their calls for calm. This is what is being seen in the stock market, but also in Euribor. This, in terms of 12 months, which is the one with which most variable mortgages in Spain are calculated, has been below the official interest rates, an unusual fact in recent times of rapid growth. Paradoxically, in the same week that the European Central Bank (ECB) raised the price of money by half a point, the indicator got cheaper by almost the same amount: exactly 0.573 points.

This is the difference between the 3.953% that Euribor marked last Friday and this Friday’s 3.380%. A quick retracement, but with volatility: the indicator fell on Monday, Tuesday and Thursday; While it increased on Wednesday and slightly (21 thousandth) it has done the same on this last day. “There are things happening every day that haven’t happened for a long time and that add more uncertainty and volatility to the indicator,” explains Hugo Rodriguez, economist at CSIC’s Institute of Economic Analysis. However, the expert believes that what is important is not these daily activities, but the general downward trend that has started.

The 12-month Euribor, whose significance in Spain lies in the fact that it is the reference that is set in almost all convertible loans to buy a house, is actually the interest at which a group of banks in the euro area are willing to lend. Is. Money within that time between yes. Therefore, this week’s movement reflects the fact that institutions believe the ECB will set sail ahead of schedule and will have to lower (or, at least, not raise) interest rates any further. Rodríguez believes this is the case because of a twofold possibility: “Since we are talking about one-year expectations, by then we can imagine that inflation will have been contained and that the market will discount that rates are about to fall; or that if inflation is not addressed there will be a problem of financial stability, and this will also force rates to be reduced or kept constant”.

The change in monetary policy that began in July last year has resulted in an increase of 3.5 basis points in official interest rates in just eight months. The objective of the financial watchdog, by increasing the cost of credit, is to reduce consumption and thus curb inflation. Economic recession, and even an eventual technical recession, were already assumed and most analysts were betting that we would see Euribor loosening at the end of the year. But the collapse of Silicon Valley Bank in the US, and its repercussions on both sides of the Atlantic, has fueled these movements.

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For the time being, in its daily value, Euribor remains below the 3.5% interest rate for main financing operations set by the ECB. The expert of the Centro Superior de Investigaciones Científicas believes that it reacts to the fact that it is the context that Euribor beats when it is in a giant phase. But when it starts to contract, and even more so at a time when there is still plenty of liquidity, what in economics is called the opportunity cost weighs more, which would be the case if banks borrow money. In order not to give, they stop earning. They have . And in this situation, as has already happened in the long phase of ultra-low rates after the last crisis, institutions look at the interest rate of the deposit facility, which is 3%. This marks the theoretical bottom of Euribor as anything above this would make it possible to get some return on the money, compared to what it would mean to leave it in the central bank.

What March hasn’t brought yet is good news for mortgage holders. This week’s turn lowers the monthly average, which is usually considered when calculating the quota, but the higher levels of the first days, when Euribor was launched towards 4%, still carry more weight. The average for March is momentarily 3.754%, still higher than February. And since a year ago it was still negative, the year-on-year difference has been widening. This means that mortgages that recalculate annually with the March figures will become even more expensive than in February, when they had already increased by an average of more than 260 euros per month. But that average still has a month to go and it will be necessary to see to what extent central banks are sought to calm down. “They want to show that they will do whatever it takes to avoid contagion and that reduces uncertainty in the sense that it’s not going to be like 2008,” said Rodriguez, who still believes The message that Euribor launched this week is very clear: “The view is that contractionary monetary policy is coming to an end.”

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