The rise of the Euribor benefits our investors

El Euríbor, the index on which most variable-rate mortgages in Spain are based, rose this past Monday, August 22, which placed it at a 1.34%. This new level of Euríbor places it at its highest daily level since April 2012, which anticipates the next interest rate increase that the European Central Bank could apply at its meeting in September.

If you're not familiar with this indicator, we'd better explain how important it is for mortgages in Spain.

Relationship between the Euribor and mortgages

The relationship that exists between Euribor and mortgages it's as simple as it is important. This benchmark is used to calculate the interest that those who have contracted a variable-rate mortgage, in addition, the evolution of this indicator will mean that the share of this type of loan rises, maintains or falls over time.

To understand it properly, we must take into account three fundamental aspects with regard to the relationship between the Euribor and mortgages:

• El Euríbor It only has an effect on mortgages of Variable type, which are those whose interest is calculated by adding the Euríbor plus a differential, which is a percentage set by each bank as they deem appropriate.
• The mortgages of Variable type they are so called because the value of Euríbor it is reviewed periodically, so it is variable. At that point, the entity will review what the level of the previous month's benchmark is, and it will be that The figure that is used to calculate the interest and the fee that the customer will pay. Therefore, if the Euribor increases the quota, so will it.
• It should be noted that the normal thing in Spain is that the level of the Euribor a is used as a reference for the calculation of interest 12 months.

What does this increase mean for mortgages?

Forecasts estimate that the Euríbor It will close this month of August above the 1.1% in their monthly average. This increase will represent an increase of more than 110 euros per month for mortgage payments that are renewed with the data for the month of August. This monthly increase would mean a an additional expenditure of more than 1,3000 euros per year.

The truth is that the forecasts for the future are not much more encouraging. According to Fernando González Urbaneja, journalist and director of the magazine “Counselors”, the Euribor may reach 2% this year.

“The exceptional thing has been these past years, with all variable-rate mortgages at 0%. The fact that it reaches 2% over the horizon for the entire year and mortgages appreciate throughout 2023 is very reasonable. I don't think it will reach 3%, but of course an increase in the cost of mortgages compared to last year or the five-year average is not a hypothesis, it's a fact,” he explained.

How does the Euribor climb to Reental benefit?

If you've come this far you're probably thinking: If this climb is so bad, how does this benefit Reental and your investors? The answer is simpler than you think.

The rise in interest rates for mortgages is directly related to a reduction in the demand for these loans to banking institutions. As you know, mortgages are used, among many other things, for purchase of a property. The fact that the purchase of real estate is reduced is a positive thing for Reental, because, as you know, Reental It explodes in the form of renting All your tokenized properties. Therefore, directly or indirectly, the rise in the interest rate reduces the number of purchases and The demand for rent increases, which benefits the tokenizable properties from Reental, and obviously to their investors.

Conclusion

Although most people can put their hands to their heads when they hear about this rise in Euríbor, our investors should not be worried, in fact, as we have been able to verify, if this increase affects our investors it is positive. The decrease in the number of purchases is related to a rise in demand for rent, a demand that Reental Calm down with your tokenized properties.

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