Rising Euribor rate increases housing loan costs for borrowers

The sharp rise in the 12-month Euribor rate on Tuesday has increased monthly costs for homeowners with variable-rate mortgages by tens of euros, with larger loans seeing increases of nearly €100, according to calculations by Finnish public broadcaster Yle.

Danske Bank economist Kaisa Kivipelto calculated that a €100,000 loan tied to the 12-month Euribor, with a 0.6% margin and a 20-year term, would see monthly payments rise by nearly €30 after today’s rate adjustment. For a €400,000 loan, the increase would be around €120.

The 12-month Euribor jumped to nearly 3% on Tuesday, marking its largest single-day increase since 2008. Nordea’s chief economist Jan von Gerich described the surge as unexpectedly steep, suggesting the current level may be slightly exaggerated. He predicts a minor correction in the coming days.

Market volatility has been driven by geopolitical tensions, particularly the conflict in Iran, which has pushed up oil prices. Fears of broader inflationary pressures have led to expectations of further interest rate hikes by the European Central Bank (ECB). The next ECB meeting, where a potential rate increase could be announced, is scheduled for late April.

Despite recent rises, Euribor rates remain significantly lower than their 2022 peak. Most Finnish mortgages are linked to the 12-month Euribor, though some follow three-month or six-month rates, which also increased today.