Everything indicates that the Euribor will once again break a negative record in November. And the fact is that the index to which the vast majority of variable mortgages are referenced trades at a provisional average of -0.48%, so if the month closes at those values, it will register a new historical minimum (the fourth consecutive).
For mortgages that have a review over the next few weeks, this will mean an average saving of about 165 euros compared to the previous update. Savings with annual and semi-annual review As the Euribor will close November at historical lows, its value will be lower than the one registered a year ago (-0.272%) and a semester ago (-0.081%). This is also the biggest drop in recent years in annual and semi-annual terms, so those who have their variable mortgage revised soon will enjoy a significant reduction in their installments. Let’s say, for example, that a client has an average variable mortgage of 150,000 euros, to be repaid for 25 years and with an interest of Euribor plus 1%. If you had an annual review of the interest rate and the November value of this index were applied, your fees would drop by 13.72 euros per month, so you would save about 164.64 euros overall compared to the previous year.
Now, those who will notice a greater reduction in their monthly payment will be those who have a semester review. Continuing with the previous example, the loan installments would be cheaper by 26.52 euros per month. Consequently, the savings compared to the previous semester would be a total of 159.12 euros.
Will there be negative interest mortgages?
This new historical low of the Euribor could also lead to negative territory the interest of many of the variable mortgages that were contracted before 2010. And it is that at that time, the differentials offered by the bank, which is the part that is added to the index to calculate the interest, they were in many cases below 0.50% or even 0.35%. Most banks choose to apply 0% interest when that circumstance occurs. The bank’s justification is that a loan contract cannot, by nature, have a negative interest, as that would force entities to pay interest to clients.
Now, according to the president of the European Banking Authority, José Manuel Campa, banks would have to apply these negative rates (and pay the customer) if there are no legal restrictions that prevent it. Spanish law only prohibits the application of mortgage interest below 0% since June 2019, so those who signed their contract before that date could claim that a negative interest be applied to them. Of course, given that the amount that could be charged would be very low, it would be necessary to assess whether it would be worthwhile to litigate for little money.
Low Euribor until when?
As for the future, most forecasts suggest that this benchmark will remain below 0% in the short term. According to the Bankinter Analysis Department, for example, the Euribor will trade between -0.15 and -0.05 within a year, while the CEO of CaixaBank, Gonzalo Gortázar, assured a few weeks ago that the markets believe that this situation could continue until beyond 2030.
Either way, having a variable mortgage currently seems like a good deal, especially if your repayment period is short.