What is Euribor?

Euribor, short for Euro Interbank Offered Rate, is a key benchmark interest rate in the European Union. It represents the average interest rate at which a selected panel of banks in the eurozone lend unsecured funds to one another in the interbank market.

How is Euribor calculated?

Euribor rates are calculated and published by the European Money Markets Institute (EMMI) for different maturities: - 1-week - 1-month - 3-month - 6-month - 12-month

Each banking day, a panel of banks submit the rates at which they believe one prime bank would offer term deposits to another prime bank. The calculation involves:

1. Collecting submissions from all panel banks
2. Eliminating the highest and lowest 15% of submitted rates
3. Calculating the average of the remaining rates
4. Publishing the result rounded to three decimal places

You can see the current Euribor rates here.

Why is Euribor important?

Euribor serves as a reference rate for numerous financial products including:

• Mortgages: Variable-rate mortgages are often linked to Euribor rates
• Consumer loans: Many personal and auto loans use Euribor as their base rate
• Interest rate swaps: Used by businesses to manage interest rate risk
• Forward rate agreements: Contracts based on future interest rates

For homeowners, Euribor is particularly significant as it directly impacts monthly mortgage payments. When Euribor rises, so do the interest payments on variable-rate mortgages.

Historical context

Euribor was first published on January 1, 1999, coinciding with the introduction of the euro. Since then, it has become one of the most important interest rate benchmarks globally.

The rate has seen significant fluctuations over the years: - Reached highs above 5% during the 2000s - Dropped into negative territory in 2015 - Returned to positive values in 2022

You can explore historical Euribor trends to understand past rate movements.

Comparing different Euribor terms

Different Euribor terms (1-month, 3-month, etc.) behave differently based on market expectations. Generally:

• Shorter terms (1-month) react more quickly to immediate market conditions
• Longer terms (12-month) reflect expectations about future economic developments

This often creates a yield curve that provides insights into market sentiment about future economic conditions. Visit our term comparison page to see how different Euribor terms compare.

Conclusion

Understanding Euribor is essential for anyone with a variable-rate mortgage or other financial products tied to this benchmark. By staying informed about Euribor trends, consumers can better anticipate changes in their financial obligations and make more informed decisions.