The Euribor is approaching 2%, bringing relief to mortgage holders with savings of up to 260 euros per month.

TheEuribor has recorded its largest year-on-year drop in 16 years, but is still resisting the psychological barrier of 2% . The most widely used benchmark index in Europe for calculating interest rates on variable-rate mortgages closed May at 2.081%, 0.063 percentage points below April's figure (2.143%), but well below the close of a year earlier (3.68%).

This is great news for mortgage holders, especially those with variable-rate mortgages who must review their mortgage with the May figures. So much so that those who must review their monthly payments annually will see their payments reduced by between €130 and €260 each month , or, equivalently, between €1,600 and €3,200 per year , depending on the amount remaining on the loan.

According to iAhorro calculations, someone with a 30-year variable-rate mortgage of €150,000 , with an interest rate of the Euribor plus a spread of 0.99%, will see their monthly payments fall by €133.92, going from €775.25 to €641.33. This, likewise, will mean an annual reduction of €1,607.10 for the mortgagor in total. Meanwhile, if the mortgage amount were to rise to €300,000 , with the same conditions as the previous example, the monthly savings would increase to €267.85 each month: from €1,550.51 in monthly payments, the mortgage holder would pay €1,282.66. In this case, the annual savings would be €3,214.20 .

Current Euribor levels guarantee installment reductions at least until the end of the year and, presumably, during the first months of 2020. The greater or lesser savings will depend on the intensity of the Euribor's decline, which will depend directly on the European Central Bank's (ECB) monetary policy. But will it manage to break the 2% barrier? According to the experts consulted, yes, sooner rather than later.

When will it drop below 2%?

"The evolution of the Euribor in 2025 (and 2024) is marked by a shift in the ECB's monetary policy and by market pressure due to expectations of interest rate cuts. The closing figure for May, just above 2%, represents the fourth consecutive drop and, although the monthly decline is slight, the year-on-year cut is the largest in 16 years , falling from 3.68% in May 2024 to the current 2.08%, which represents a significant relief for those with variable-rate mortgages," highlights Luis Javaloyes, CEO of Agencia Negociadora.

"The downward trend in the Euribor is clearly linked to the expectation that the ECB will cut interest rates next Thursday."

In the short term, according to this expert, "the downward trend of the Euribor is clearly linked to the expectation that the ECB will cut interest rates at its next meeting on June 5. The market anticipates that, following this decision, the Euribor could fall below 2% by the end of June, breaking an important psychological barrier . This dynamic is explained by the fact that the Euribor reacts early to monetary policy decisions and the expectations of economic agents."

In the medium term, according to Javaloyes, the evolution of the Euribor will depend on several key factors. "On the one hand, if inflation continues to moderate and falls below 2%, the ECB could maintain a path of additional cuts, although likely gradually and cautiously. On the other hand, geopolitical uncertainty could influence monetary policy, especially in relation to the back-and-forth between the US government and the federal court regarding the annulment of Trump's tariff policy , which has yet to be resolved."

"The most likely scenario," continues this expert, "is that the Euribor will continue to fall in the coming months , benefiting those with annual mortgage reviews, although the speed and depth of the fall will depend on the aforementioned factors. The uncertain environment demands caution , but everything indicates that the Euribor could remain at low levels or even fall further, at least until the end of 2025, provided that no significant external shocks occur."

Simone Colombelli, Director of Mortgages at iAhorro, also believes that the Euribor will soon break the psychological barrier of 2%. "Right now, with the Euribor at 2.081%, the indicator is 0.170 percentage points away from the official interest rate (2.25%). But if the ECB decides to reduce rates by another 25 basis points next week, they would already be at 2%, below the current average value of the Euribor," iAhorro points out. "It's rare to see the Euribor higher than the official interest rate, so logic tells us that the benchmark index has to fall further," he adds.

"It's rare to see the Euribor above the official interest rate, so logic tells us the benchmark index needs to fall further."

Pau A. Monserrat, a professor at the University of the Balearic Islands, an economist and expert specializing in financial products, and a partner at Futur Finances, refines the forecasts a little further. "Although some analysts feared that the arrival of Donald Trump and his tariff rhetoric would cause an increase in inflation in the eurozone, which would inevitably translate into a tightening of the ECB's monetary policy, the truth is that, for now, the effect is the opposite: prices are being contained by the appreciation of the euro, the price of oil is falling, and weak demand is cooling the European economy." In fact, he highlights how the forecasts of the 19 analysis services published bimonthly by Funcas place the CPI at 2% as early as 2026.

"Handling a slightly bearish price stability scenario today, the consensus of Funcas panelists places the 12-month Euribor at 1.93% for December 2025 and 1.85% for the end of 2026. At Futur Finances, we review the forecasts of Funcas every month, as well as those of Bankinter, CaixaBank, and the ECB itself. Analyzing historical forecasts allows us to observe how analysts' future expectations have changed over time. Thus, for example, in January 2024, Funcas predicted a Euribor of 2.66% in December 2025, and Caixabank at 2.45%. After a year and a half, the forecasts have improved substantially for mortgage holders: 1.93% (Funcas) and 2.09% (Caixabank) . The ECB predicts the 3-month Euribor in annualized terms; in December 2023 They saw the interest rate at the end of 2025 at 3.55%, and in their latest publication from March 2025 they already put it at 2.20%."

That is, in just a year and a half, the main analyst firms and the ECB itself have gone from setting the Euribor rate for the end of 2025 above 2% (2.45% to 3.55%) to already seeing rates below 2% (1.93% to 2.20%). "In other words, the evolution of economic variables and the Donald Trump effect have altered the Euribor predictions, with a measurable impact of a reduction of between 0.5 and 1.3 percentage points," Monserrat highlights.

However, he adds that "with the caution that all economic predictions imply, it seems that we are left with a 2025 and 2026 that will be favorable for mortgage holders."

Regarding the current outlook for the mortgage market, the Director of Mortgages at iAhorro stated, "Right now, the market is betting on fixed-rate mortgages : both users and institutions are increasingly proactive in taking out or selling this type of loan, and we're already seeing fixed-rate mortgages overtaking mixed-rate mortgages."

According to the latest data collected by the iAhorro Index, last April, 38.66% of mortgage comparison site users chose a mixed-rate mortgage and 60.92% a fixed-rate mortgage. This is happening, Colombelli explains, because "until now, people were jumping on the mixed-rate bandwagon when what they really wanted was a fixed-rate mortgage , but their interest rate was too high. Now it's dropping, and that's why the percentages are reversing."

However, in Pau A. Monserrat's opinion, we must wait for better fixed-rate mortgage terms as the forecasts become more concrete. "At the moment, the major banks are not improving their fixed-rate offerings and are offering terms that, in my opinion, do not compensate for the security they offer."

"For the moment, the big banks aren't improving their fixed-rate offerings."

Regarding whether it's a good time to get a mortgage, Colombelli believes, "We're seeing banks making slight reductions every month, and this is going to continue."

One of those price update moments could come as early as next week, " after the ECB meeting , especially if this organization implements a new cut in official interest rates, financial institutions may make a move. Furthermore, this is a 'hot' period for banks, during which they tend to improve their product offerings to encourage more people to take up more ."

And, as Colombelli points out, "before and after summer, in June and mid-September, mortgage offers are typically adjusted. On the other hand, July and August tend to be maintenance months, with only banks that don't have competitive products typically applying reductions," Colombelli concludes.