The Euribor (euro interbank offered rate) rates are used as the reference rates for housing loans. The rise in these rates has surprised experts. The increase in the rate doesn’t affect the cost of borrowing yet, because interest rates are still below zero.
The 12-month Euribor has been at zero since February 2016. On Thursday, it was already -0.090 %, compared to -0.368 % a month earlier, on 12 March 2020. The Euribor rates data of the Bank of Finland.
The monetary policy of the European Central Bank (ECB) gives the movement direction for the Euribor and the central bank has outlined that there will be no interest rate hikes in the near future. Thus, the rise of Euribor is a specific phenomenon.
The current coronavirus crisis has meant the massive stimulus measures aimed at money markets, backed by large central banks. The purpose is to keep cash flows moving and the cost of financing low. At the same time, however, interest rates, which are important for the ordinary people, or Euribor rates, have started to rise. The most popular reference rate for the Finnish mortgages, i.e. the twelve-month Euribor, has clearly hurt lately, although it is still in minus values. For a mortgage debtor, the rise will not matter for so long until Euribor do not rise clearly to the plus.
Housing sales were brisk until recently and the growth of the Finnish housing loan stock accelerated. According to data published by the Bank of Finland at the end of March, the loan stock has last grown faster than this in September 2013. At the end of February 2020, the stock of euro-denominated housing loans to Finnish households was EUR 99.8 billion. In such a large loan amount, even small interest rate changes are already clearly felt.
According to Central Association of Taxpayers Chief Economist Mikael Kirkko-Jaakkola, the situation should be monitored, although the rise in interest rates has not yet had a significant effect on mortgage costs. "If the trend continues more longer, it will cause challenges for the mortgage debtor and still at a challenging time."
The full information and the source text can be found at Taloussanomat website.
Published 11.04.2020, FINREPO