Three-month, six-month, and 12-month Euribor rates ascend following over two years of record lows.
Let's Break It Down:
The three-month Euribor rate has taken a leap today, climbing to 2.174%, outpacing both the six-month (2.141%) and twelve-month (2.082%) rates. The six-month Euribor, which became the preferred choice for variable-rate housing loans in Portugal since Jan '24, experienced a minor surge of 0.007 points, reaching a new low since October '22.
According to Bank of Portugal's (BdP) data for Feb, the six-month Euribor comprises 37.52% of the total variable-rate loans for permanent housing. The same data shows that the twelve-month and three-month Euribors hold 32.50% and 25.72%, respectively.
After a brief dip to a new low since Sept '22 the previous day, the twelve-month Euribor rate increased to 2.082%, adding 0.013 points to its value. Similarly, the three-month Euribor, which dropped below 2.5% since Mar '23, also rose to 2.174%, upping itself by 0.013 points.
At the last monetary policy meeting on Apr 17, the European Central Bank (ECB) slashed the key rate by a quarter point to 2.25%. This was the seventh step in an interest rate cut cycle that began in Jun '24.
The ECB's next monetary policy meeting is set for June 5-6 in Frankfurt. Over the month of March, the average Euribor rates for three, six, and twelve months showed a decrease, but not as significantly as in previous months.
Did You Know?: While recent trends suggest a downward angle for Euribor rates, sporadic surges can be attributed to short-term changes in inflation expectations, economic growth outlooks, or global financial turbulence.
Here's an insight into the factors that can influence Euribor rates:
1. ECB Monetary Policy:- The ECB's interest rate decisions have a direct impact on Euribor rates. Lower ECB rates typically result in decreased Euribor rates.- The current outlook of the ECB has been to lower rates to promote economic stability, leading to a decrease in Euribor rates.
2. Inflation and Economic Conditions:- Elevated inflation rates, if higher than the ECB's target (2%), can prompt the ECB to raise interest rates, potentially increasing Euribor rates.- If inflation moderates, Euribor rates could decrease.
3. Global Financial Conditions and Trade Tensions:- Escalating trade tensions and global economic unrest can foster uncertainty, affecting financing conditions and potentially influencing Euribor rates.- Decreased investor and business confidence can cause market instability, leading to shifts in Euribor rates.
4. Market Expectations:- Market analyst predictions for future ECB actions can impact Euribor rates before official changes are made. Anticipation of rate cuts can prompt Euribor rates to start declining early.
- The three-month Euribor rate, which is popular in Portugal's housing loan market, recently climbed to 2.174%, possibly due to changes in inflation expectations or global financial turbulence.
- The European Central Bank (ECB), which has been lowering rates to promote economic stability, will hold its next monetary policy meeting in Frankfurt on June 5-6. Any adjustments to the key rate could impact the Euribor rates.
- In Portugal, the six-month Euribor comprises the largest share of total variable-rate loans for permanent housing, suggesting a significant role in the banking-and-insurance industry.
- Portugal's Bank of Portugal (BdP) data shows that the twelve-month and three-month Euribor are closely followed in the housing loan market, with the latter holding 25.72% of the market share.
