Will your credit be reviewed in October? Get ready. Increase of the term can be up to 45%

 Will your credit be reviewed in October?  Get ready.  Increase of the term can be up to 45%

Euribor rates rose sharply in September and will severely punish those whose mortgage loans are reviewed next month. View the simulations

October should be a month of positive surprises for most Portuguese wallets. Most receive 125 euros in state aid to cope with the consequences of inflation. Anyone with children under the age of 24 will receive 50 euros per child. And retirees get a bonus equal to 50% of their pension.

But in October, there are other surprises to consider financially. And these are not positive at all. For many, the price of gas and electricity will rise. And the Portuguese with mortgages who have their contracts revised next month will be faced with the biggest unpleasant surprises: their installment amount with the house will increase considerably.

This happens because the rating of the contracts of those who have home loans is based on the previous month’s average of the respective Euribor rate it uses as an index. And in September, the three-month Euribor, the six-month or the 12-month Euribor all showed the same behavior: they rose sharply. This is the first time that the effect of euribor rates with positive values ​​has been felt. This leads to increases in the installment to be paid in October that can exceed 200 euros.

But the bad news doesn’t stop there, as these values ​​are expected to continue rising in the coming months. This is because Euribor rates are closely linked to changes in interest rates introduced by the European Central Bank and this Wednesday, the body overseen by Christine Lagarde has indicated a new increase for October that could reach as much as 0.75 points.

Increases from 95 to 200 euros

Contracts indexed to the six-month Euribor, which accounts for the bulk of Portugal’s home loan stock, will feel the impact of interest rates in positive territory for the first time, where they have been since June 6. And this is already the second review this year.

This means that for a loan of 150 thousand euros over 30 years, with a spread of 1%, and using the average Euribor rate for September, the monthly installment will be 600.51 euros, 146.44 euros more than paid since the last credit review . Corresponds to an increase of 32%.

The six-month Euribor average rose from 0.466% in July to 0.837% in August and stands at 1.596%% in September. The six-month Euribor was negative for six years and seven months (between November 6, 2015 and June 3, 2022).

delivery in October

150 thousand euros, 30 years, spread 1%

Euribor 6 months

is paying

454.07

Go pay

600.51

increase

146.44

A larger increase will be felt by those who have contracts indexed to the 12-month Euribor and who will experience the rate hike for the first time in 2022. Since the contract is revised from year to year, the holder will have to pay plus 201.72 euros in the installment of the house, when you have to deposit the 651.16 euros at the bank. In the past 12 months I have paid 449.44 euros. Corresponds to an increase of 45%.

After rising to 0.005% on April 12, the first positive since February 5, 2016, the 12-month Euribor has been above 0% since April 21. The average also went up from 0.992% in July to 1.249% in August. And in September the average is already at 2.33%.

delivery in October

150 thousand euros, 30 years, spread 1%

Euribor 12 months

is paying

449.44

Go pay

651.16

increase

201.72

For contracts indexed to the three-month Euribor, on the other hand, the effect will be smaller, but close to one hundred euros. The advance increases to €561.96, an increase of more than €95 since July. The increase corresponds to an increase of 21%.

It is the third upward revision of this type of contract this year, with another six euros paid in April and another 17 euros in July.

The three-month Euribor was negative between 21 April 2015 and 13 July 2015 (seven years and two months). The three-month Euribor average rose from 0.037% in July to 0.395% in August and now stands at 1.011%.

delivery in October

150 thousand euros, 30 years, spread 1%

Euribor 3 months

is paying

466.10

Go pay

561.96

increase

95.86

The Euribor started rising more strongly since February 4, after the European Central Bank (ECB) admitted it could raise key interest rates this year due to rising inflation in the eurozone and the trend was reinforced with the onset of the Russian invasion of Ukraine. .

Christine Lagarde believes that the ECB “must do everything” to “bring inflation back to 2% in the medium term,” the ECB president underlined at an event in Frankfurt on Wednesday.

If the bank does not go through with another rate hike, Lagarde says the consequences for the economy will be more serious than the rise in the cost of credit. “Our goal is not to reduce growth, our main goal is to ensure price stability. This is something the ECB must achieve,” he added.

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