Euribor Brings More Relief to Mortgage Holders: Falls Again in May and Approaches 2%

The benchmark indicator for variable-rate mortgages closed May with a monthly average of 2.081%, compared to 3.68% in May 2024. More reductions in monthly payments are expected.

The Euribor has recorded its fourteenth consecutive monthly drop. Pending official confirmation from the Bank of Spain, the benchmark for most variable-rate mortgages closed May with an average of 2.081%. This is the lowest level since August 2022 and marks a 1.6 percentage point drop compared to last year.

Thanks to this sharp year-on-year decline — the most significant in the last decade — mortgage holders with upcoming reviews will see their payments reduced by over €100 per month.

For example, a standard mortgage of €150,000 over 25 years with an interest rate of 1% + Euribor will see savings of around €130 per month, or over €1,500 annually. For a similar loan of €300,000, the savings are even greater: over €250 monthly and €3,000 annually. It's important to note that the actual reduction will depend on several factors, including the loan amount, the years already paid off, and the interest margin applied by the bank.

The May drop in the Euribor comes just before the upcoming meeting of the European Central Bank's Governing Council, scheduled for Thursday, June 5. Markets are anticipating a new interest rate cut of 25 basis points, which would bring the base rate to 2%, down from the 2.25% maintained since mid-April. If this prediction holds, it would mark the eighth rate cut in a year and the seventh in a row.

Looking ahead, the future of the Euribor will depend on the ECB’s monetary roadmap. Current forecasts suggest one or two additional rate cuts in the coming months, potentially bringing the Euribor down to between 1.5% and 1.75%. However, this will depend on economic performance, inflation trends, and the outcome of proposed U.S. tariffs.

According to Ebury — the fintech specializing in international payments and foreign exchange and backed by Banco Santander — “there is a possibility that the Euribor could fall below 2% after the June 5 ECB meeting, although it is already very close to the bottom.”

Meanwhile, the Funcas Panel — which gathers consensus forecasts from banks, analysts, research centers, and companies — has revised its Euribor forecast downward. It now expects the 12-month Euribor to be at 1.9% by year-end, two-tenths below its March estimate. According to their calculations, the rate will remain stable at these levels at least through the end of 2026, averaging 1.85% by then.

Taking all this into account, it seems that the Euribor will continue its downward trend before entering a period of stability, meaning the scope for further reductions in mortgage payments in the coming months is increasingly limited.