The Euribor closes September at two-year highs and stands at 3.24%

BarcelonaThe Euribor, the benchmark indicator for the majority of variable-rate mortgages in the State, has closed the month of September at 3.247%, the highest level since July 2024, according to preliminary data published this Wednesday by the Bank of Spain.

It is the first time that the rate has closed a month above the 3% barrier, after the indicator reached 2.954% last August. Compared to September of the previous year, the indicator has increased by more than one point, as the Euribor was then at 2.172%.

The figures imply that a person who has taken out a variable-interest mortgage of 150,000 euros for 30 years and with a spread of 0.99% plus Euribor, will see their monthly installment increased by almost 98 euros, the equivalent of 1,174.5 euros per year.

Inflation and interest rates

In the year-to-date, the Euribor has already added six increases, the last three – July, August and September – consecutively. The main reason behind this evolution has to do with interest rates and inflation, which have been on the rise since the outbreak of the war between the United States and Iran.

With the start of the attacks in the Middle East and the consequent blockade of the Strait of Hormuz, the price of oil skyrocketed. At this moment, the price of a barrel of Brent – the benchmark in Europe – remains close to one hundred dollars, well below the less than 70 dollars prior to the start of the hostilities.

Over time, the rising cost of fuel and logistical expenses – transporting goods via alternative routes to Hormuz implies more time and more money – has ended up being passed on to the rest of products and services. The data published yesterday by the National Statistics Institute made this clear: the cost of living for families across the State has increased by 4.9% this September compared to last year, a rate of variation not seen since February 2023.

Faced with a scenario of rising prices and an economy that is resisting turbulence quite well, both in Spain as a whole and in the eurozone, the European Central Bank (ECB) has chosen to raise interest rates with the aim of cooling economic activity and, thus, containing inflation near the 2% target. It should be remembered that modifying interest rates is one of the main tools the ECB has to control inflation. A rise in rates implies that banks have to pay more for the money they lend each other and, consequently, an increase in the cost of their products, including mortgages.

Future hikes

In its last meeting held last September, the governing council of the euro zone's monetary authority, the European Central Bank (ECB), opted to raise interest rates to 2.5%, the highest figure since March of last year. Given that the prospects for an agreement in the Middle East still seem distant and that the economy is resilient –the ECB revised upwards the latest growth forecasts for the eurozone– further future rate hikes cannot be ruled out.

In fact, the Frankfurt-based organization maintains that it still has room to continue tightening monetary policy in the event that the conflict in the Middle East continues to make fuel more expensive. While its president, Christine Lagarde, avoids anticipating events, this week she pointed out before the European Parliament that a "moderate" rate hike is the "appropriate" strategy.

However, the French leader also said that, for now, there were no signs that the current inflation episode "is taking hold" in all segments of the economy. "We do not react to energy prices. We react if we detect that the increase in these prices is incorporated into inflation," she maintained.

The next ECB meeting, scheduled for next October 29, will be a good time to assess what direction the organization will take between now and the end of the year regarding interest rates and, therefore, regarding the future evolution of the Euribor. Nevertheless, it will also be necessary to take into account market expectations regarding developments in the Middle East, as the fear of the persistence of the conflict will also influence the expectations of companies and consumers regarding prices.