Do you have housing credit? Take a deep breath before you open this article — then see how much your payment could go up in October

The European Central Bank raised interest rates again. The central bank’s policy has already led to an 80% increase in premiums payable to the bank

Note | The European Central Bank has three reference interest rates:

– Main operations rate RefinancingUnder which banks can obtain loans from the European Central Bank for one week: the interest rate is 4.25% but was set at zero between March 2016 and July last year – and will now rise to 4.5%;

– fees DepositThis determines the interest that banks receive on deposits with the European Central Bank: 3.75%, and will become 4% – the highest value ever. But between July 2012 and June 2013 the number was zero. Between June 2013 and July of last year, the situation was negative, forcing banks to pay for the deposits they made at the European Central Bank.

– And rate Providing liquidityWhich determines the interest that banks pay when they borrow from the European Central Bank for one day (overnight). It currently stands at 4.50% and will increase to 4.75%.

Simulation

How much will mortgage payments actually increase and how much could they increase in October (simulations based on information known through September 13)

30-year loan at 1% interest

(Euribor data for September only until 13)

Uripur 3 months

Uripur 6 months

Euripur 12 months

The ECB’s policy has already led to an 80% increase in premiums owed to the bank

Despite what the European Central Bank decided on Thursday, the development of the Euribor is already showing signs that the rise in interest rates that act as an indicator for mortgage loans is coming to an end.

In August, the average 12-month Eurobor rate, the most widely used rate in credit contracts in Portugal, was lower than in July. The 6-month Euribor rate only rose by 2,000 percentage points between July and August, and the 3-month Euribor rate rose by 0.108 percentage points, still the lowest increase since June last year.

The already known September data, only for the first thirteen days of the month, seems to confirm the interest rate stagnation trend. The 12-month Euribor average rises compared to August, but only three thousandths of a percentage point, in the 6-month Euribor the increase is nine thousandths, and even in the 3-month Euribor the increase is only 0.026 points. In other words, the three rates were practically unchanged compared to the previous month.

But this data does not mean that the installments due to the bank are also stagnant. This is because the comparison is not made month by month, but rather against the last review of the contract. For those whose index is the 12-month Euribor, for example, and whose contracts are reviewed in October, the relevant interest rate to consider would be the September average. With the data already known, the rate is 4.074%, but this value must be compared with the rate that was applied in September last year, i.e. 2.233%. For this reason, holders of contracts reviewed in October will still face a significant increase in premiums due to the bank.

Taking the example of a €150,000 30-year mortgage, with a profit margin of 1%, linked to a 12-month Euribor, and based only on known data from September, the installment would be €812.21 when just a year ago it was €651.41, an increase of more than €160. .

The increases vary depending on the index and the loan amount, but the trend is the same. Even if interest rates are stagnant, it will take more months in which they remain stagnant or begin to decline for premiums to become stagnant or decline as well.

If interest rate increases caused significant increases last year, if we analyze the increase we have seen since euro interest rates started rising, roughly in January 2022, the increase in premiums is even more significant.

Following the same example for a 30-year contract worth €150,000, with a difference of 1%, the increases are around 80%.

A 3-month Euribor indexed contract in January last year required a payment of just over €444, and in October this year, it could exceed €787, an increase of more than €340 or 77%. For the same example, but with 6-month Euribor as the indicator, the premium rises from €447 to €801, an increase of €354 or 79%. For a 12-month Euribor-indexed contract, the increase is just over 80%, with the premium going from €450 to €812, a difference of more than €361.