Euribor will break the 4% barrier in 2023, which will cause home sales to fall, causing prices to fall within months, according to Spanish real estate network Donpiso. “Euribor will continue to rise and exceed 4%, even though it was negative a year ago,” emphasized Emiliano Bermúdez, deputy general manager of the company.
The 12-month Euribor rate, currently used in Portugal for variable rate mortgages, hit 3.518% this Tuesday, putting the provisional monthly average for the second month of the year well above 3.4%, against 3 .33% at the end of January. Just a year ago, on the other hand, it was still moving in negative territory and was around -0.28%. According to the Bank of Portugal, the 12-month Euribor already represents 43% of the “stock” of floating-rate permanent home ownership loans, while the six-month Euribor represents 32%.
So, according to the real estate network’s predictions, 2023 will be an “adjustment year” in the real estate industry, with the effects of inflation on rising costs of living and access to finance having an immediate impact. the number of sales and the price of the home.
However, “since the price development is inelastic, it takes at least a few quarters for the sales adjustment to be reflected in the prices. The decline in business due to inflation started in mid-2022, so the decline in prices is starting to happen now,” Emiliano Bermúdez emphasized. “Financial entities will be more careful in creditworthiness studies in the granting of mortgage loans due to the general impoverishment of the population due to the increase in prices and the stability of wages.”
Inflation in the Eurozone is already showing signs of falling, at 9.2% in December. But the European Central Bank decided, on the 2nd, to raise key interest rates again by 50 basis points. This increase raises the interest rate on refinancing operations to 3%, which could further affect the upward evolution of Euribor and, therefore, increase the cost of housing loans. This will not be the last rate hike the ECB plans, as the regulator has predicted it will raise them again in March, also by 50 basis points.
And if it reaches 4%?
Of course, it will make the installments of mortgage contracts more expensive.
From January 2022 to last January, the installments of the revised properties became between 286 and 477 euros more expensive. However, if the Euribor rate reaches the 4% predicted for mid-2023, then the increase will be between 343 and 572 euros, depending on the value of the 25-year credit between 150 thousand and 250 thousand euros, respectively. Of course, if the credit amount is higher, the increase will be higher.