Euribor at record level

The interest rate at which European banks lend money to each other is once again at a record high. The value is considered an important indicator for savings accounts and mortgages.

The Euro Interbank Offered Rate, or Euribor for short, is the average interest rate at which most banks in Europe lend money to each other. The plural already indicates that there are several Euribor values, depending on the respective term. These range from one week to twelve months.

Basic rate for interest rate products
Euribor is a prime rate, a kind of guideline, for numerous interest rate products on the market. These include, not least, mortgages and savings accounts. For this reason, the Euribor and its development is interesting and important for both financial experts and private individuals.

Reaction of the ECB
The current Euribor values refer to its development over the last five days. This refers to the comparison with one week, one month, three months, six months and twelve months. In September, the Euribor climbed to an average of just under 2.1 percent, well above the August figure of 1.25 percent. Its daily rate even reached more than 2.4 percent, the highest it has been since January 2009.

In the meantime, the European Central Bank has reacted and set the interest rate in the eurozone for refinancing transactions at 1.25 percent. This brings the deposit rate to 0.75 percent and the lending rate to 1.50 percent. What was primarily a measure to combat record inflation will also have an impact on the Euribor in the medium term.Indicator for market developments
However, the Euribor has a life of its own and reacts very precisely to market developments. With the recorded increase, the value attempts to anticipate upcoming monetary policy movements. What is relevant is that interest rates will rise beyond the expected level, say financial experts. The problem is that we do not know how far, and we do not know when they will fall again. This creates uncertainty.

Further increase expected
Asufin, for example, predicts that the Euribor will be at 2.2 percent at the end of the year and believes that it could even reach three percent next year.

Other analysts expect the figure to reach 2.5 percent towards the end of this year. They also do not rule out that the three percent mark will be exceeded.

This will depend on the development of the European economy and whether the ECB will raise interest rates once again in 2022 or even twice at the meetings in October and December.

Variations üblich
The development of the Euribor over twelve months has always shown fluctuations in the past. In May 2008, for example, the 12-month value was once at 5.4 percent, then fell to around 1.2 percent within a year. The Euribor reached its lowest point between September 2021 and May 2022 with a drop of around 0.4 percent.