The six-month Euribor rate recently rose to 2.5% and could continue to rise this year, meaning monthly mortgage payments will rise in Estonia, where many loans are tied to it, writes ERR News.
Last year, Euribor interest rates fluctuated between 2% and 2.1%, but in early March they reached 2.3%, and on the 24th of March the rate reached 2.5%. Anne Pärgma, Swedbank mortgage area manager, said that the increase is largely due to economic uncertainty and inflationary pressures. She noted that the situation in the Middle East has caused energy prices to rise, which in turn affects the prices of many goods and services, which suggests that price pressures will remain stronger than before. Pärgma explained that while the European Central Bank (ECB) has not announced an immediate interest rate hike, markets are issuing loans at higher interest rates, which is reflected in a higher Euribor rate.
Most Estonian mortgages are linked to the six-month Euribor, and interest rates are reviewed twice a year. A mortgage with a total amount of 140,000 euros at a Euribor rate of 2.1% would have a monthly payment of around 630 euros. If the six-month Euribor reaches 3.2%, which many markets expect by the end of the year,
the monthly payment would increase by around 90 euros.
Swedbank issues home loans for an average of 26 years and, based on the principles of responsible lending, uses a rate of 6%. Pärgma said that potential home buyers are unlikely to change their decision based solely on fluctuations in Euribor. The highest Euribor rate ever recorded was in the fall of 2008, when the six-month rate reached 5.431%. From 2015 to mid-2022, the Euribor rate was negative, reaching a new record of 4.143% in October 2023.
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