Mortgage payments likely to rise as six-month Euribor spikes
The six-month Euribor, tied to many loans in Estonia, recently jumped to 2.5 percent and could rise further this year, driving up monthly mortgage payments in turn.
The rate had hovered between 2 and 2.1 percent for nine months before climbing to 2.3 percent in early March and hitting 2.5 percent on Tuesday.
Swedbank mortgage area manager Anne Pärgma said the rise is largely driven by heightened economic uncertainty and inflation pressures.
"Events in the Middle East have pushed energy prices up," Pärgma said. This, in turn, affects the cost of many other goods and services, increasing expectations that price pressures will remain stronger than before.
She explained that while the European Central Bank (ECB) hasn't signaled immediate interest rate hikes, markets are pricing in higher rates, which is reflected in the Euribor increase.
Most Estonian home loans are linked to the six-month euribor, with interest rates adjusted accordingly twice a year.
On a €140,0000, 30-year mortgage with a 1.45 percent margin, payments at the previous 2.1 rate were roughly €630 a month.
If the six-month Euribor should reach 3.2 percent, which markets expect could happen by the end of the year, monthly mortgage payments would jump about €90, Pärgma said.
Rate unlikely to drop again this year
Swedbank issues home loans for an average of 26 years and assumes a 6 percent rate in affordability checks on prospective borrowers, reflecting responsible lending.
Homebuyers, she added, are unlikely to change their plans solely due to Euribor swings.
Following a historic six-month record of 5.431 percent in fall 2008, the Euribor was negative from 2015 to mid-2022, more recently peaking again at 4.143 percent in October 2023.
Swedbank expects it won't drop again until next year.
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Editor: Karin Koppel, Aili Vahtla
