Mortgage loan. December brings new bad news, but light is beginning to appear at the end of the tunnel

 Mortgage loan.  December brings new bad news, but light is beginning to appear at the end of the tunnel

Euribor rates continue to rise, but at an increasingly slower pace. Interest rates should continue to rise until the end of the first half of 2023 and then stabilize at a level already lower than the current one. Consult the simulation for your home loan

There seems no escape. The Portuguese with home loan contracts due to be reviewed next month should have fresh bad news, with installments soaring due to the increase in Euribor rates.

Holders of credit contracts indexed to the 12-month Euribor, who currently represent the bulk of mortgage loans in Portugal, are the ones who will experience the greatest variation in the installment period to be paid to the bank. Simulations performed by CNN Portugal, based only on the average value of Euribor rates in the first half of November, show that for these contracts the increase will exceed 50%.

The extension of the term is because the last time these credits were revised in December last year was based on the Euribor average of November 2021, when the interest rate still showed a negative value (-0.487%). Today the reality is very different and in the first half of the month the average 12-month Euribor was already slightly above 2.8%.

The result is a staggering increase in the installment period that can lead to an increase of just over 40 euros per month on a contract where the outstanding capital is only 25 thousand euros. But that with a contract where the loan amount is 150 thousand euros, you can increase the installment amount by almost 250 euros per month.

How much will mortgage payments increase?

Loan 30 years with 1% surcharge

12 MONTHS EURIBOR

Loan of 25 thousand euros

deposit

increase

December 2021

74.94

December 2022

116.52

41.58

Loan of 50 thousand euros

deposit

increase

December 2021

149.88

December 2022

233.04

83.16

Loan of 75 thousand euros

deposit

increase

December 2021

224.82

December 2022

349.55

124.73

Loan of 100 thousand euros

deposit

increase

December 2021

299.76

December 2022

466.07

166.31

Loan of 125 thousand euros

deposit

increase

December 2021

374.7

December 2022

582.59

207.89

Loan of 150 thousand euros

deposit

increase

December 2021

449.64

December 2022

699.11

249.47

The increase in installments in December will be smoother for those whose credit is indexed to Euribor for three or six months, but if you analyze what has happened since December last year, you can see that while the increase in installments is smaller, but , still very important.

For those whose credit is indexed to the Euribor 3 months, the increase varies between slightly more than EUR 17 and slightly more than EUR 100, depending on whether the outstanding capital is EUR 25,000 or EUR 150,000.

The big difference, however, is that for those who have 3 months Euribor, this is the fourth time that the term has been revised, so that the increase in the monthly term in the past 12 months already amounts to 28 euros for contracts with a debt of 25 thousand euros or almost 170 euros for contracts with a debt of 150 thousand euros. Finally, including the last 12 months, the increase in term reaches almost 40%.

How much will mortgage payments increase?

Loan 30 years with 1% surcharge

3 MONTHS EURIBOR
Loan of 25 thousand euros
deposit increase
December 2021 74.06
March 2022 74.45 0.39
June 2022 76.05 1.6
September 2022 85.03 8.98
December 2022 102.26 17.23
increase in one year 28.2
Loan of 50 thousand euros
deposit increase
December 2021 148.13
March 2022 148.89 0.76
June 2022 152.11 3.22
September 2022 170.05 17.94
December 2022 204.52 34.47
increase in one year 56.39
Loan of 75 thousand euros
deposit increase
December 2021 222.19
March 2022 223.34 1.15
June 2022 228.16 4.82
September 2022 255.08 26.92
December 2022 306.78 51.7
increase in one year 84.59
Loan of 100 thousand euros
deposit increase
December 2021 296.26
March 2022 297.79 1.53
June 2022 304.22 6.43
September 2022 340.1 35.88
December 2022 409.04 68.94
increase in one year 112.78
Loan of 125 thousand euros
deposit increase
December 2021 370.32
March 2022 372.24 1.92
June 2022 380.27 8.03
September 2022 425.13 44.86
December 2022 511.3 86.17
increase in one year 140.98
Loan of 150 thousand euros
deposit increase
December 2021 444.39
March 2022 446.68 2.29
June 2022 456.33 9.65
September 2022 510.16 53.83
December 2022 613.55 103.39
increase in one year 169.16

The same will happen for contracts that are indexed to the six-month Euribor. The increase in December will not be as large as that of loans indexed to the 12-month Euribor, but because this is already the second increase this year.

If we analyze the value of the installment in December of last year and that of the revision in the following month, it seems that the increase could reach an increase of more than 46%.

How much will mortgage payments increase?

Loan 30 years with 1% surcharge

6 MONTHS EURIBOR

Loan of 25 thousand euros

deposit

increase

December 2021

74.43

June 2022

78.77

4.34

December 2022

109.19

30.42

increase in one year

34.76

Loan of 50 thousand euros

deposit

increase

December 2021

148.85

June 2022

157.53

8.68

December 2022

218.37

60.84

increase in one year

69.52

Loan of 75 thousand euros

deposit

increase

December 2021

223.28

June 2022

236.3

13.02

December 2022

327.56

91.26

increase in one year

104.28

Loan of 100 thousand euros

deposit

increase

December 2021

297.7

June 2022

315.07

5.37 pm

December 2022

436.74

121.67

increase in one year

139.04

Loan of 125 thousand euros

paid

increase

December 2021

372.13

June 2022

393.83

21.7

December 2022

545.93

152.1

increase in one year

173.8

Loan of 150 thousand euros

paid

increase

December 2021

446.55

June 2022

472.6

26.05

December 2022

655.12

182.52

increase in one year

208.57

Rate hikes are slowing and there is light at the end of the tunnel

Euribor rates have been increasing for practically all maturities since the beginning of the year and this increase has also been seen to be greater from month to month. That is, rates not only rose, but the increase accelerated.

Apparently, although the rise continues, there is now a slowdown. From September to October, rates rise again, but at a slower pace, and in November, for the first 15 days only, they rise again, but again at a slower pace.

Is there light at the end of the tunnel?

Filipe Garcia, economist at IMF – Information for Financial Markets, emphasizes that “the market has long believed that rate hikes [do Banco Central Europeu (BCE)] will end in the first half of 2023” and that “a few weeks ago” there was a perception that the reference rate would rise to a maximum of 3.25%, at which point this expectation was revised downwards to values ​​between 2.75% and 3%, as a likely ceiling between May and June.” That is, the ECB’s benchmark interest rate will rise further than the current 2%, but the ‘jumbo’ will increase as the 0 increases became known. The 75 percentage points decided by the ECB seem a long way off.

An idea that meets the statements made on Tuesday at a conference by the Governor of the Bank of France, François Villeroy de Galhau, in Japan. “Above this level, we will probably continue to raise rates, but we will be able to do so more flexibly and possibly less quickly. ‘Jumbo’ rate increases will not become a new habit,” he stressed in statements quoted by Reuters.

And in this scenario, Filipe Garcia recalls that, for example, “with regard to the six-month Euribor, the market expects a maximum value between 3.05% and 3.1% in about half a year”, i.e. a value comparable to the 2.78% recorded in the first half of November.

In other words, concludes Filipe Garcia, due to the expectation “that central banks may become less aggressive in their cycle of rate hikes”, everything points to the 6-month Euribor rising above 3% at the start of next year half of the year, before starting to decline in the second half of the year, culminating in a period of stabilization between 2.5% and 2.75% over the next five years”.

🇧🇷