12-month Euribor is nearing the end of its most extraordinary year, making an upward move of more than 330 basis points on aggressive hikes in interest rates to curb inflation. Although the mortgage index par excellence has moderated its rise above 2.8% in recent days, the market is reckoning that it will end 2022 3% tenths up or tenths down, at levels it has been since January 1st. January 2009 when it finally hits the brakes and stabilizes.
The key lies in the next European Central Bank (ECB) meeting on Dec. 15, when the rise in money prices could ease after two consecutive 75 basis point increases. According to Bloomberg, the possibility of a 50 basis point hike is now gaining ground as euro-zone inflation showed signs of slowing in November, falling for the first time in 17 months and the threat of an economic recession rising. The ECB itself does not rule out a “technical recession” in 2023.
There are opinions for every taste among analysts. Investment firm Edmond de Rothschild AM believes that “economic data reinforces the idea of slower rate hikes”. At A&G Banca Privada they comment that “although it is very likely that the ECB will reduce the rate of increase and raise interest rates by 0.50%, it will still have to tighten monetary policy to control inflation.” Audrey Bismuth for her part , by La Française AM doubts that a single data element will prompt the ECB to end its monetary tightening and does not rule out a 75 basis point hike despite this encouraging sign. María Marcos, analyst at Monex Europe, points out that the ECB has clearly expressed its intention to raise the deposit rate to 2%, but wonders whether it is feasible to raise it to 3% and maintain it in 2023. In his opinion, this will depend on whether the growth slowdown is faster than expected and whether inflation remains unusually high.
Meanwhile, experts estimate that Euribor will be at 3% or very close to that percentage by the end of the year. From there, Funcas expects it to rise slightly to 3.1% through 2023 and then start falling. José Manuel Amor, managing partner of Afi, also forecasts a maximum of 3.1% for the first few months of next year. “This is consistent with expectations for the deposit facility to rise to 3% in Q1 2023, a long stop at that level and the start of rate cuts in Q2 2024,” it said.
Abaco Capital’s Fernando Romero claims that after this year’s spectacular rise, Euribor will slow its rise and peak in the first half of next year, while XTB analyst Joaquín Robles doesn’t rule out that “it could come close to up.” to 3.5% in the following six months.
The Association of Financial Users (Asufin) sees the Euribor at the end of 2022 at a “number close to 3%”. At Bankinter, they put it at 2.8%, but they forecast that it will hit 3% in 2023 and fall to 2.1% in 2024. For the analysts at Caixabank, the 12-month Euribor will end December at an average of 2, 56% while it will reach 2.73% in December 2023 and stand at 2.51% by the end of 2024. BBVA forecasts that Euribor will continue to rise and stabilize by around 3% in early 2023, around 350 basis points more than in early 2022.
Ibercaja CEO Víctor Iglesias said at a recent financial event that he expects Euribor to hover between 2.5% and 3% in the coming months considering the war in Ukraine will end in 2023 i.e. in the United States it will reach a ceiling of around 4.5% or 5% and provided that European fiscal policy is not expansionary and there are no excessive second-round effects.
For his part, Carlos López of Euribor.com.es, a website that monitors the index daily, believes that December will be a key month for Euribor, which will “most likely” surpass the psychological 3% level. With Euribor averaging -0.502% just a year ago, those who need to review their mortgage will be doing so at historically low levels and face record increases in financial costs. With an average amount of EUR 143,000 and a term of 24 years with a difference of 1% to Euribor, the fee stops at EUR 527 to EUR 762, which means EUR 235 more per month or EUR 2,820 more per year.
“Many mortgage borrowers are unaware of the increase that awaits them at the next review, they should get the numbers up as soon as possible and be prepared for the largest increase in their monthly payment they have ever seen, which in some cases is more than will be 45%,” he says. Lopez.
Euribor started 2022 negative at around -0.4%, but inflationary pressures, which worsened with Russia’s invasion of Ukraine in February, changed the ECB’s discourse and also the course of the index, which was in April for the first It has turned positive again for the first time in more than six years and has continued to rise in light of the ECB’s sharp interest rate hike.