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Housing Credit Alert: Six years later, euribor is already positive

Housing Credit Alert: Six years later, euribor is already positive

The interest rates used in mortgage loan installments are on the rise. In April, euribor closed for 12 months with a positive average, which had not happened for six years and three months. The other Euribor is also on its way to becoming positive. This will start appearing at the end of the month.

Portuguese families will start to see higher mortgage payments. Not because interest rates are too high – but because they are not as unnaturally low as they once were. Take the 12-month euribor: After six years and three months in negative values, they close April back in positive territory.

On Friday, the last day of April, the 12-month euribor index closed at 0.166%. It’s almost zero, isn’t it? Yes, but exactly one year ago, on April 29, 2021, the rate was the same at -0.479%. In a debt of one hundred thousand euros, there is another 645 euros in interest per year, or another 54 euros in the monthly payment.

Looking at average values, April was the first month since January 2016 that the 12-month euribor rate was positive: the month average was 0.013%. It is reported that housing credit contracts are reviewed by price type: every twelve months in the case of euribor to 12 months, according to monthly averages. In Euribor for 6 months, the premiums are reviewed every six months.

There are many Euribor rates, which are used as a reference in housing loans, and at the moment the 12-month rate is the only positive rate. The 6-month Euribor, which is the most used in mortgage loan contracts in Portugal, closed in April at -0.226%, compared to -0.518% a year earlier. The 3-month Euribor index closed in April at -0.429%, while a year ago it was at -0.536%.

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The differences are small, but not many when they turn into tens of euros at the end of the monthly payment. The problem is not with the April rate, but with the direction of the interest rate, which is rising in line with inflation.

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Higher interest rates are already costing the country more

Portuguese families currently owe a total of 97.9 billion euros in mortgage loans, according to Bank of Portugal data updated to March 2022. If the Euribor index increases by one percentage point by the end of the year, many analysts admit, families will. Pay nearly €1 billion more in interest annually.