Euribor Rates Climb Across All Maturities, Increasing Mortgage Costs
The Euribor rates, which form the benchmark for calculating monthly payments on most home loans in Portugal, have increased across the three, six, and 12-month maturities compared to the previous week. All three key rates have maintained their position above the 2% level, signaling a rising cost of borrowing for consumers and businesses.
This development in the interbank market comes after the European Central Bank (ECB) decided to maintain its key policy rates at its last meeting on July 24. The decision, which was anticipated by financial markets, followed a period of monetary easing that saw eight consecutive rate reductions beginning in June 2024. The stability in the ECB's main refinancing rate has not prevented interbank rates from creeping upwards.
Market analysts remain divided on the ECB's next move. Some forecasts suggest that the central bank will keep its main rates on hold for the rest of the year to assess inflationary pressures. However, other economists are predicting a further rate cut of 25 basis points at the next policy meeting, which is scheduled to take place in Frankfurt on September 10 and 11. The decision will hinge on incoming economic data for the Eurozone.
The monthly average for the Euribor rates in July had already marked a turning point, reversing the downward trend observed in previous months. The increase was slight for the shorter-term rates but was notably more significant for the six-month Euribor, which is a common benchmark for mortgages in Portugal. This upward trend reflects the banking sector's pricing of future credit risk and interest rate expectations.
Euribor rates are determined by the average interest rate at which a panel of 19 major Eurozone banks are prepared to lend funds to one another on the interbank market. As such, they are a key indicator of the health and liquidity of the European financial system. The recent rise will directly impact the monthly installments for households with variable-rate mortgages, potentially squeezing disposable income. The trend will be closely monitored by property investors and potential homebuyers, as financing costs are a critical component of real estate affordability.
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