What impact have the Euribor declines had on mortgage installments?
With the downward trend of Euribor in recent months, there has also been a decrease in mortgage installment for those with variable-rate loans. Check how much with practical examples below.
The impact of Euribor rate decreases on mortgage payments with practical examples.
The Euribor has been registering a downward trend in recent months, providing significant relief to Portuguese families with variable rate mortgage credit.
Most contracts are linked to the 6 or 12 month Euribor rate, which means that house installments are periodically reviewed based on these rates.
How does the Euribor affect the monthly installment?
The Euribor rate is used by banks to calculate interest on home loans. When Euribor rises, monthly payments increase; when it falls, the opposite effect occurs, allowing borrowers to pay less for credit.
In recent months, the 6 and 12-month Euribor have gradually decreased, resulting in a reduction of monthly installments. Let's analyze some practical examples to better understand this impact.
Read more: Explaining Euribor: Know all about this index
Practical examples of reduced installments
To illustrate the effects of Euribor drops, let's consider a mortgage of 150,000 euros, with a term of 30 years and a spread of 1%.
1. Euribor 6-month:
- June 2023: 6-month Euribor was at 4.15% → Monthly installment: €785.82
- December 2023: 6-month Euribor fell to 3.75% → Monthly installment: €747.50 (minus €38.32)
- February 2024: 6-month Euribor fell to 3.50% → Monthly installment: €723.90 (€61.92 less than June)
2. Euribor 12 month:
- June 2023: 12-month Euribor was at 4.20% → Monthly installment: €790.00
- December 2023: 12-month Euribor dropped to 3.85% → Monthly installment: €755.80 (€34.20 less)
- February 2024: 12-month Euribor dropped to 3.60% → Monthly installment: €732.60 (€57.40 less compared to June).
What to expect in the coming months?
The forecasts indicate a continuation of the downward trend of the Euribor throughout 2024, albeit more moderately. If the trend persists, it is likely that installments will continue to decrease slightly, which could mean more savings for families.
However, it is crucial for borrowers not to assume that this situation will be permanent. Interest rates may rise again in the future, so it is advisable to exercise prudent financial management, including the possibility of early repayments to reduce the total cost of the loan.
Read next: How to make an early repayment of my home loan?
Consult a credit intermediary from Poupança no Minuto to get better informed about the impact of the interest rate regime to choose in housing credit, according to your specific case.
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