The Euribor, an acronym for Euro InterBank Offered Rate, represents the interest rate applied when one bank lends money to another.
For the clients of a bank, the Euribor serves as a reference index when calculating the interest on a mortgage loan.
The Euribor is also used to define syndicated loans to companies, reverse mortgages or variable rate debt issues, among other financial instruments.
In Spain, the Euribor came into effect on January 1, 2000. It replaced the Míbor, although today this index is still applied to mortgages signed prior to that date.
The Euribor data is published every day in the Official State Gazette for each of its defined terms: one week, one month, three months, six months and 12 months.
The European Banking Federation calculates the Euribor with data from the main financial institutions in the euro zone.
It takes as a reference the average interest rate for deposit operations with terms of one year. It eliminates 15% of the highest data and 15% of the lowest, and on the remaining 70% of the data it calculates the average that results in the Euribor data.
The evolution of the Euribor is directly linked to the monetary policy of the European Central Bank (ECB).
When applying for a mortgage, you can choose between three interest rates that define the monthly payment.
The bank will offer or have signed an interest based on the Euribor which will be:
In mortgage loans, the variable interest rate is set by adding two components:
If when signing a mortgage loan the reference Euribor is at 2% and the differential is 0.5%, the interest applied to the loan will be 2.5%.
When the mortgage interest is reviewed, every six months or a year, if the Euribor drops to 1%, and its differential is 0.5%, interest of 1.5% will be applied to the loan.
The mortgage that you signed or the one that you are going to contract will specify the date on which the official value of the Euribor will be taken and will serve to review the value of each installment. It is usually the month before the signing of the mortgage or its semi-annual review.
Since 2019, a new reference index called €STR (Ester) has also come into operation.
Its meaning is the short-term interest rate of the euro zone (Euro Short Term Rate, in English) and it succeeded Eonia. It was a decision of the European Central Bank so that the indices and calculations have greater transparency.
The Euribor is used to calculate the interest rate in terms of up to one year, while the €STR reflects the price of interbank operations every 24 hours.
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