Euribor interest rates take another hit and cause installments due to the bank to fall in November

The prospect of interest rate cuts by the European Central Bank leading to a further decline in European interest rates in October. Installments due to the bank will decrease significantly again in November. Check your status

If there are 25 [pontos base] Or, at some point, there should be 50, that's something the data will tell us. “I don’t think the Board of Governors would stop looking at a faster path if the data told us to do so – it is possible.”Mario Centeno, governor of the Bank of Portugal and member of the European Central Bank's Governing Council, was quoted by Bloomberg on October 22.

The ECB has been very quick to raise interest rates, and in just over a year it went from a negative deposit rate, in mid-2022, to a 4% rate in September last year. And if it is true that no one expects that the decline in interest rates that began in June of this year will be as strong as the increase, it is also true that there are those, like Mario Centeno, Governor of the Bank of Portugal, who have opened the door for interest rates to fall faster than we have seen. .

In June, ECB President Christine Lagarde began a cycle of interest rate cuts, and since this fall, interest rates have fallen twice more, always by a quarter of a percentage point, which currently puts the ECB's deposit rate, the benchmark interest rate, at 3.25%. The next meeting of the European Monetary Authority is scheduled to be held in December, and there is widespread belief that the ECB will cut interest rates again. The only doubt is whether the drop will be by a quarter of a percentage point again, or whether the cut will be more significant this time.

Although there are conservatives, such as Mario Centeno, or his Italian counterpart, Fabio Panetta, who sit alongside the “doves” within the European Central Bank’s Governing Council, they do not rule out a faster decline in interest rates. There are also, within the same European Central Bank, “hawks”, who prefer to wait and see. On this side of the fence are, for example, central bankers in Slovenia, Germany, and Latvia.

“We must continue moving towards the neutral rate with deliberate steps,” Slovenian Governor Bostjan Vasli said on the 24th. ReutersThis was on the sidelines of the fall meetings of the International Monetary Fund and the World Bank in Washington, United States.

The neutral interest rate, which the President of the Slovenian Central Bank spoke about, is interpreted by economists, as explained in the same Reuters article, with the interest rate that does not restrict or stimulate economic growth and is considered so, in the Eurozone this ratio ranges between 2% and 2.5%, Although estimates indicate a maximum of 3% and a minimum of 1.75%. Values ​​still below the 3.25% interest rate still apply.

Economics anemia

Although no decisions have been taken, the data that has become known and which will serve to counterbalance the ECB's decision, points to a eurozone economy that, although not in recession, is displaying very weak economic activity. Data released on Wednesday by Eurostat They are aware of this fact, with the GDP of the economies that make up the euro area growing by just 0.9% in the third quarter compared to the same period last year. However, this was the best result of the year. Within the Eurozone, Germany, its main economic engine, once again recorded a negative result, confirming that in 2024, as in 2023, there will be a recession.

On the inflation side, the latest data shows a slowdown in price increases. In September, inflation reached 1.7%, thus remaining below the 2% threshold set by the European Central Bank for price stability. New data for October will be released on Thursday, however Lagarde He actually warned that it is normal for us to witness an acceleration in prices in the last months of the year.

Euribor rates are expected to decline further

Pending the ECB's decision in December, European interest rates continue their downward trajectory and in October they fell again significantly across all maturities. In the case of Euribor at 3 and 6 months, the decline exceeded the values ​​recorded in August, when the largest decline in decades was recorded.

The practical result of these cuts will be felt in November for housing credit contract holders whose contracts will be reviewed next month.

In the example of a €200,000 mortgage contract, indexed to 6-month Euribor, which is the index currently most used in Portugal, the reduction in installments could exceed €90 compared to the amount paid. For the same amount, but on 12-month Euribor indexed credit, the decrease in premiums can reach €164.

In any case, despite this decrease in installments, the monthly amounts owed to the bank are still higher than the amount paid two years ago, and especially three years ago, when average Euribor rates were still negative. No one expects, at this moment, that even if there is a further decline in Euribor rates, the premiums due to the bank will return to the values ​​​​in 2021.

Check your status:

How much has actually increased and how will the house payment develop in November?

30-year loan at 1% interest || November prices only until the 30th

Uripur 3 months

Uripur 6 months

Euripur 12 months

He notices

The calculations are based on the principle that two years ago the outstanding capital was 50, 100, 150, or 200 thousand euros, depending on the example, and that the repayment period was 30 years, with Spread From 1%. From that point on, with each revision of the contract, the corresponding interest rate applies and the amount owed and the credit repayment period decrease.