Mortgage costs go up

THE EURIBOR interest rate on home loans climbed by 18 euros a month in April on a 150,000 euro mortgage.

Home loan rates reached 4.795 per cent, 20.2 base points above the March average of 4.593.

It means that the average home loan of 150,000 euros over 30 years with a 0.7 per cent spread would correspond to monthly repayments of 851.21 euros.

This amounts to 216 euros more annually on the cost of servicing the loan.

These figures fixed by the banks on the inter-banking market have shot up from two per cent in 2005 to nearly 4.8 per cent now.

The rise in the cost of borrowing for mortgages reflects higher interest rates on credit loans amongst banks, passed on the general public, and are as a direct consequence of the financial crisis generated by the collapse in the United States mortgage market, and fears that the European Central Bank not only will not reduce interest rates, but will raise them in order to keep inflation under check.

Interest rates in euro zone countries have been fixed at four per cent, but could go up after inflation reached 3.6 per cent in March – the highest level in 16 years.

The inflation rate in April released last week stood at 3.3 per cent, which could put the brakes on an eventual increase in interest rates.

However, interest rates are unlikely to be reduced any time soon owing to the high cost of fuel and food prices.

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