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Housing loan alert: six years later, the euribor rate is already positive

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Interest rates on mortgage payments are all up. In April, the 12-month euribor closed on a positive average, which had not happened for six years and three months. The other Euribors are also on the way to becoming positive. And this will begin to be felt at the end of the month.

Portuguese families will start to see monthly housing loan payments increase. Not because interest rates are too high, but because they are no longer as abnormally low as before. Take the case of the 12-month Euribor: after six years and three months in negative values, they once again closed April in positive territory.

Last Friday of April, the 12-month Euribor closed at 0.166%. It’s almost zero, right? Yes, but exactly one year earlier, on April 29, 2021, the same rate was at -0.479%. In a debt of one hundred thousand euros, there are still 645 euros of interest per year, or another 54 euros in a monthly payment.

Regarding average values, April is the first month since January 2016 in which the 12-month euribor is positive: the average for the month is 0.013%. Note that home loan contracts are reviewed according to the type of rate: every twelve months in the case of 12-month Euribor, according to monthly averages. In the 6-month Euribor, the maturities are reviewed every six months.

There are several Euribor rates, which serve as a reference in mortgages, and for the moment the 12-month rate is the only one that is positive. The 6-month Euribor, which is the most used in mortgage contracts in Portugal, closed the month of April at -0.226%, against -0.518% a year ago. The 3-month Euribor closed April at -0.429%, whereas a year ago it was at -0.536%.

The variations are small, but not so much when they turn into tens of euros at the end of the monthly payment. The problem is not so much the April rate, but the trend in interest rates, which rise in line with inflation.

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Portuguese families currently owe a total of 97.9 billion euros in mortgages, according to data from the Bank of Portugal updated to March 2022. If the Euribor increases by one percentage point by the end of the year, as many analysts admit, then households pay almost a billion euros in additional interest per year.

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