Mortgage Rates in Europe - The EURIBOR Rate
The majority of European mortgage products are based on a variable interest rate, calculated in the same way that UK lenders calculate tracker mortgages.
The interest rate will be calculated by adding a fixed margin to the base rate (the EURIBOR) used by the lender. EURIBOR stands for the Euro Inter Bank Offered Rate. The lender has a choice of EURIBOR base rates that they can use and they are all linked to the European Central Bank’s rate.
This is the rate at which European banks can borrow from each other for a set time period, 3, 6 or 12 months for example.
Most European lenders choose to use the EURIBOR 1, 3 or 12 month index.
Typically, the EURIBOR 12 months will be dearer than the 6 months which, in turn, is more expensive than the 3 months. This is simply due to the added security brought when the rate is not reviewed as often.
Making the most of low EURIBOR rates
If you own property in Europe and do not have a mortgage currently secured on this property, you may wish to consider arranging a mortgage based on the EURIBOR rate, in order to repay debts in the UK that are based on higher rates of interest. Below is a table which shows the average EURIBOR rates since their use began in 2000 and, for comparison, you will find the average of the Bank of England base rate, also since 2000. This clearly shows that the EURIBOR rates are, on average, 1 point lower than the Bank of England base rate.
Average of the Euribor rates between January 2000 and December 2008:
|
||||||||||||
Average of the Bank of England base rate between January 2000 and December 2008:
|
