Money market rates, known as Euribor, nudged higher this Wednesday. They climbed across all common periods: three, six, and twelve months. This marked a second straight day of increases. The rates are now moving away from their lowest points in almost three years. It signals a shift in the financial landscape.
The Numbers Tell a Story
After these changes, the three-month rate settled at 1.969%. It still sits below the six-month and twelve-month rates. The six-month Euribor rate, often watched closely, rose to 2.051%. This was an increase of 0.032 points compared to Tuesday. Meanwhile, the twelve-month rate moved up to 2.083%. That’s a jump of 0.034 points from the day before.
A Key Rate for Households
The six-month Euribor rate holds special meaning for many who borrow money. Since January 2024, it became the most common rate for variable-rate home loans in a significant market. This makes its movement directly affect household budgets and monthly payments.
Insights from the Central Bank
Data released by the Banco de Portugal for May highlights its importance.
- The six-month Euribor covered 37.8% of all existing variable-rate home loans.
- It also applied to more than half (51%) of new loans of this type.
The same data shows how other rates stack up:
- The twelve-month Euribor made up 32.3% of existing loans and 40.1% of new contracts.
- The three-month Euribor accounted for 25.6% of existing loans and 5.0% of new ones.
Notably, the three-month rate has stayed below 2% since June 24.
The Central Bank’s Recent Move
These rate increases come right after a major financial decision. The European Central Bank (ECB) met in Frankfurt on June 4 and 5. They decided to lower their key interest rates by 0.25 points. This brought the main rate down to 2%. This was the first time the ECB had cut rates in this recent cycle. Many financial experts think this might be the last rate cut we see this year. The next important ECB meeting is scheduled for July 23 and 24, again in Frankfurt.
Understanding Euribor
So, how are Euribor rates determined? They are set by taking an average. This average comes from the rates at which 19 banks across the Eurozone are willing to lend money to each other. This happens on what’s called the interbank market. It’s a snapshot of how much it costs banks to borrow from one another.