Three-month Euribor rises above 0% for first time since 2015
The three-month Euribor interbank borrowing rate rose above 0% for the first time since 2015 this month (July) as financial markets price an end to negative rates in the euro zone.
Euribor rates are crucial benchmarks as all sorts of euro zone financial products, from interest rates swaps, savings accounts to mortgages, are priced off of them. That means increases will reflect in a tightening of financial conditions.
The three-month rate rose to 0.002% on the 14th July, entering positive territory for the first time since April 2015.
The latest move came after markets ramped up bets on European Central Bank rate hikes, to expect nearly 100 basis points of hikes by September, after a higher-than-expected U.S. inflation print raised bets on a 100 bps hike from the Fed this month.
Along with bond yields, Euribor rates have risen sharply this year. Three-month Euribor was -0.57% at the start of the year and as of the 25th July was sitting at 0.23%
We are already seeing banks make changes to their mortgage products with a reducing number of rate options available and some fixed rates increasing. Until the volatility in the market eases, we are unlikely see the banks re introduce a wider product range
So far, the increases don’t seem to have deterred people from buying as the purchase market remains strong with many selling agents still reporting increasing inquiry rates
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