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Tumbling Interest Rates in Europe Leaves Some Banks Owing Money on Loans to Borrowers
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The ECB's monetary policy is making its way through the financial system to help homeowners in the eurozone with their mortgages. A large majority of Spain's home mortgages have rates that increase or decrease according to the level of 12 month Euribor, according to Spain's mortgage association. The mortgage rate is normally set by adding about 0.3% to the Euribor 12 month rate. In Italy about half the mortgages have variable rates, most linked to Euribor, according to mortgage broker Mutuionline. The decline in 12 month Euribor rate to 0.187% by April 2015, as a result of the ECB's monetary policy, provides significant relief to mortgage holders during the eurozone economic crisis. This is especially true for Spain with its housing crisis and high unemployment. In Portugal the interest rate on most mortgages is determined by using the monthly average of the 3 month and 6 month Euribor, which are close to zero. Some mortgage holders in Portugal are seeing their mortgage payments cut by about half as a result, providing much needed relief to homeowners with mortgages. This is one way in which the ECB's monetary policy is helping the eruozone recovery in 2015-2016. Spain and Portugal suffer from high unemployment which has led to many homeowners unable to afford their mortgage payments, affecting everything from housing prices to consumer spending and demand in the economy, with severe effect in the period 2011-2014.
Relief for mortgage holders in Spain, Portugal, France and other eurozone countries as the Euribor rate approaches zero in 2015
04/14/2015
The Euribor rate is close to zero in April 2015. Mortgage rates in Spain, Portugal and other eurozone countries are set at a level of Euribor plus 0.3%. This means significant savings for homeowners with a mortgage in Italy, Spain and Portugal, countries where mortgage holders badly needed relief, especially following the housing crisis in Spain with high unemployment. In some cases this has cut the mortgage payments by a third of the amount owed. Euribor below zero could lead to a situation where homeowners are owed money by banks which could then reduce the mortgage principal owed. In Italy, Spain and Portugal mortgage rates use Euribor plus about 0.3% for setting mortgage rates. This is one way in which the ECB's monetary policy is helping the economic recovery in Europe.
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The Euribor 12 month rate at 0.187% in April 2015, and the impact on housing and homeowner mortgages in Spain, Portugal, Italy and other eurozone countries
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In Spain most mortgage interest rates are tied to the 12 month Euribor, set at about 0.3% above the 12 month Euribor rate, which was 0.187% in April 2015. In Portugal most morgage interest rates are set using the average of the 3 and 6 month Euribor rate, which are close to zero. The result is significant reduction in mortgage payments by a third to half of the original mortgage payment. This is providing significant relief to homeowners with mortgages in Spain, Portugal and Italy. Spain and Portugal suffer from a severe housing crisis and high unemployment. This result of the ECB monetary policy, aids the economic recovery in Europe.
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Euribor close to zero and relief for suffering homeowners with mortgages in Spain, Portugal and other eurozone countries
05/28/2014
Most mortgages in Spain and Portugal are based on the Euribor rate. The ECB's monetary policy under Draghi has led to the decline of the Euribor rate to near zero in 2015, giving homeowners in extremely high unemployment countries such as Spain and Portugal much needed relief. Homeowners in Italy, with stagnant incomes and high unemployment, and other eurozone countries also get relief.
Linked Articles
Tumbling Interest Rates in Europe Leaves Some Banks Owing Money on Loans to Borrowers
Wall Street Journal 04/14/2015
Spain Still Suffering Fallout From Housing Bust
Wall Street Journal 05/28/2014
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