Do you have a mortgage? 2024 brings relief from monthly installments.
For home loan holders with variable interest rate, 2024 finally brings a relief in monthly installments: There is a forecasted decrease in various Euribor rates, with a slowdown in reference interest rates. Understand better what is expected this year and how to immediately reduce your loan installment.
Want to reduce your monthly mortgage payment now? Learn about other options from credit intermediaries at Poupança no Minuto! Or first read about how much and when the Euribor rates are expected to decrease.
In 2024, Euribor rates at various maturities will slow down
In 2024, monthly payments for home loan borrowers are expected to decrease, with the prospect of Euribor rates decreasing throughout the year.
The peak of the rise will have been reached in 2023, "although below the 2008 records, and should fall throughout 2024, easing the effort of those who pay credit to the bank, according to analysts contacted by Lusa" as you can read in Notícias ao Minuto news.
First, note that the Euribor rates rise as a result of the constant increases in benchmark interest rates by the European Central Bank (ECB). This led to the rise of Euribor rates since April 2022, reaching highs since 2008, with the six-month rate at 4.138% in October 2023 (considering the peak of 5.431% in 2008).
But the setback started happening in recent weeks, with analysts considering that this trend will continue throughout 2024, as the ECB has decided to keep the key rates unchanged in the last two meetings. There may even be a cut in the first semester (if the ECB considers that inflation is under control).
What is the analysts' opinion about the Euribor expectations for 2024?
"At Lusa, XTB analyst Henrique Tomé stated that the Euribor should continue to fall in 2024 following ‘a change in interest rates trajectory’. To influence the decline of Euribor, he explained, are the decisions of the ECB, but also inflation, economic conditions, and the decrease in sovereign debt interest rates", reads the news.
However, the analyst considers that "these perspectives can change rapidly if there are changes in the trajectory of inflation or other economic indicators that could lead the central bank to reflect on its monetary policy strategy," as quoted by Notícias ao Minuto.
ActivTrades analyst Mário Martins highlights that the year 2024 "will start with the six-month Euribor below 4% and is likely to end between 3.25% and 3.50%", quotes the information platform. "Unless something unexpected happens that reverses the path of inflation normalization to the desired level of 2%, which would suspend this relief," explains the analyst.
A decrease in Euribor rates, notes Mário Martins, could be higher if the eurozone economy significantly slows down, in which case the analyst points to a six-month Euribor rate at the end of 2024 between 2.75% and 3%.
However, analysts believe that the decrease in interest rates will only happen in the medium term, in the second or third quarter of 2024, and therefore, it will impact longer-term Euribor rates. This means that as Euribor rates fall, they immediately (even slightly) reduce the monthly installments of borrowers with housing credit.
Notice the simulations made for Lusa by Deco/Dinheiro&Direitos, cited by Notícias ao Minuto: "A client with a loan of 150,000 euros, over 30 years, indexed to the six-month Euribor and with a spread (bank profit margin) of 1%, currently pays the bank around 798.55 euros per month (considering the average Euribor of December, 3.927%). If the Euribor drops to 3.5%, they will pay 760.03 euros, almost 40 euros less".
However, even though the impact is immediate, clients with mortgage loans indexed to the Euribor with a longer term will take longer to see their monthly installment relieved. "For example, a client with a mortgage loan indexed to the 12-month Euribor whose installment was renewed last November, around 4%, will have to wait until November 2024 for the installment to be revised downwards".
There is no need to wait for relief from Euribor rates.
Don't want to wait so long to feel a significant impact of the interest rate decrease on your monthly loan installment? Know that there are other options that can immediately lower what you pay for your mortgage credit.
Not having the credit indexed to Euribor guarantees greater stability and predictability in your monthly payment. By changing your variable rate to fixed or mixed, besides being able to achieve a lower installment, what you will pay over 2024 is always the same.
Currently, there are banks promoting campaigns with mixed rates starting from 2% if you fix the rate for 1 year. To do this, you must transfer your housing credit to a new institution that allows these conditions.
Contact the credit intermediaries of Poupança no Minuto to simulate your specific case and discover the best credit proposal for you!