How Euribor Affects Your Mortgage

If you have a variable-rate mortgage in the eurozone, your monthly payments are likely tied to the Euribor rate. Understanding this connection is crucial for managing your finances effectively.

The direct link between Euribor and mortgage rates

Most variable-rate mortgages in Europe use a simple formula:

      Mortgage interest rate = Euribor rate + Bank's margin
    

For example, if you have a mortgage linked to the 12-month Euribor with a bank margin of 1%, and the current 12-month Euribor rate is 3.5%, your mortgage interest rate would be 4.5% (3.5% + 1%).

Check current Euribor rates to see how they might be affecting your mortgage today.

How often does your mortgage rate change?

The frequency of rate changes depends on which Euribor term your mortgage is linked to:

• 12-month Euribor: Rate revised once per year
• 6-month Euribor: Rate revised every 6 months
• 3-month Euribor: Rate revised every 3 months
• 1-month Euribor: Rate revised monthly

Most residential mortgages are linked to the 12-month Euribor, providing stability with annual revisions. However, some borrowers prefer shorter terms that might adjust downward more quickly in a falling rate environment.

Compare the behavior of different terms on our term comparison page.

Calculating the impact on your monthly payment

When Euribor rises or falls, your monthly payment changes according to this formula:

      Monthly payment change = (Loan principal × Euribor change) ÷ 12
    

For instance, if you have a €200,000 mortgage and the Euribor increases by 0.5 percentage points:

      Monthly payment increase = (€200,000 × 0.005) ÷ 12 = €83.33
    

This means your monthly payment would increase by approximately €83.33.

Historical perspective on mortgage rates

Looking at historical Euribor trends can provide valuable context for mortgage holders:

• 2008: Euribor peaked above 5%, resulting in high mortgage payments
• 2015-2022: Negative Euribor rates led to historically low mortgage costs
• 2022-Present: Rising Euribor rates have increased mortgage payments significantly

Understanding these historical patterns can help you anticipate potential future changes.

Strategies for managing Euribor risk

If you're concerned about rising Euribor rates, consider these options:

1. Switch to a fixed-rate mortgage: Provides certainty but usually at a higher initial rate
2. Change the Euribor term: Moving from 12-month to shorter terms might be beneficial in some scenarios
3. Make extra payments: Reducing your principal minimizes the impact of rate increases
4. Refinance: If you qualify for better terms, refinancing might lower your overall costs

Conclusion

Your mortgage is likely one of your largest financial commitments, so understanding how Euribor affects it is essential. By staying informed about rate trends and having a plan for different scenarios, you can better manage this significant aspect of your personal finances.

For the latest information on Euribor rates, regularly check our current rates page and historical data.