Tancrede de Pola (OP Columnist)
THE past 12 months has seen the Euribor rate bottom out at an all time low.
And the lasting low interest rate has continued on into 2016 to the jubilation of mortgage owners across the continent. And the even better news is that it is showing no signs of shooting skywards anytime soon (no doubt, music to the ears of borrowers from London to Lithuania).
The interest rate you pay on your mortgage consists of two elements: Euribor rate + margin charged by the bank (their profit, so-to-speak).
The Euribor is a daily reference (base) rate, published by the European Banking Federation, based on the averaged interest rates at which Eurozone banks offer to lend.
How it affects you is thus: the lower the Euribor rate is, the lower your mortgage interest rate which means (and this is the good news) the less you pay in mortgage repayments. Likewise, the banks are reducing their margins so, again, rates payable are lower.
For several years after the economic crisis in 2008, many mortgage borrowers will have noticed a sudden, drastic increase in their monthly payments due to bank margins, even as Euribor was falling..
Now both have been steadily falling across the board ever since. With each year the reductions are becoming smaller and it is getting harder to believe that the Euribor could drop any lower.
But it has. Which is great news for all homeowners that owe money to their bank.
Dipping below 0.1% for the first time last year, 2015 was a record year for the Euribor rate.
In fact, the last 12 months saw the biggest percentage drop in the last decade – falling by 82% from 0.328% at the start of the year to 0.059% by the year’s end.
So, now that we are in 2016, what’s the outlook for the Euribor for the immediate future?
(Good news, we hope.) Well, the ECB has pledged to keep its monetary (loosening) policy the same until at least 2017, insisting that it is in no hurry to increase interest rates.
Which could spell ever further drops, with some experts believing the rate could plummet to as low as 0.04% over the coming months.
While a good indication of how the Euribor will react is by looking at the European benchmark interest rate, there are other factors to take into consideration as well. For example, it is worth keeping an eye on the eurozone’s own economy and inflation.
Despite the fact that there are a number of elements to consider, in general, there shouldn’t be any surprises on the market in the near future and borrowers can expect at least another year of low-interest payments. Happy New Year!!!!
Good news for debtors, lousy news for savers.
And people who worked hard and saved for their old age feel like slitting their throats !! A principle as old as commerce itself – that you pay to use someone elses’ money – has been sacrificed for short term expediency !
They don’t need “our” money Peter while the printing presses have been shoveling funny money into the bank’s coffers. They just flip the finger to our two penneth and cream interest from “free” money.