Real estate news

The calculation method of the Euribor, the index to which variable rate mortgages are linked, is about to change. From the end of 2019 the new Euribor will come into force: what will be the effects on financing for the purchase of a house?

The European Parliament has voted for the regulation that will send the "old" Euribor to mothballs, replacing it, starting from the end of 2019, with a similarly calculated interbank index. The European regulation establishes requirements for greater transparency that the new index will have to comply with. The objective is indeed to avoid conflicts of interest between the banks involved in establishing the index of European interbank loans, in order to avoid manipulation of rates as in the past. According to the European regulation, the new Euribor must be calculated on the basis of the actual transactions that took place on the market.

What is Euribor?

But what is, in fact, the Euribor? His name is an acronym for Euro Inter Bank Offered Rate, which is the interest rate that banks in Europe offer to each other to grant loans and to finance themselves at different maturities, from one week to 12 months. At present the rate is set daily on the basis of the quotations of a group of 20 banks, relatively small compared to the rate that the rates have in calculating the variable rate mortgages of millions of European households, as well as hundreds of billions of countervalue of derivatives used by a lot of financial institutions. Moreover, these banks are located in different areas of Europe, which can present different needs. This is why a simple rate average could no longer guarantee transparency.

Since 1 January 1999, the index has replaced the Italian Ribor as a reference to variable rate mortgages in Italy. Among the Italian banks involved in the current Euribor calculation are Intesa SanPaolo, Unicredit and Monte Paschi di Siena.

New Euribor, what effects on variable rate mortgages?

Effects on variable rate mortgages? "The greatest risk for those who have an indexed mortgage", explains Stefano Tempera, founder of Cercamutuo.com, "could be that the new Euribor, due to the fact that it will be linked to typically fluctuating market transactions, could undergo more oscillations and become more volatile compared to the index as we know it today, with the consequence of seeing the installments of variable rate mortgages rise in particular historical periods ".

If on the one hand the customers of these contracts will have the certainty of greater certainty in determining this rate, it is also true that the new index, more subject to market transactions, may turn out to be more volatile, presenting greater fluctuations that at present. Situations like today's, in which we are witnesses of a Euribor index that has been standing for months on the same values ??(negative) may no longer be everyday. The algorithm for calculating the new rate, however, should in part depend on parameters that contribute to giving greater stability to the index itself.