Euribor NEVER thought that would create so many expectations and raise many fears. The rate at which banks lend between them is the data on which are regularly renewed the rates of variable rate mortgages, and for a country where 70% of household savings is invested in housing, this is critical. The suggestion of the President of the European Central Bank (ECB) that could soon get the guy who pays the Bank, and serves as a reference, has caused a wave of speculation and anxiety, for now, the euro appreciated and change to $ 1.40, and the interest rate on government debt have also risen.
There are four issues directly related to Euribor are truths that we should not ignore. The first is that the relationship between Euribor and the rate of ECB is not immediate. Currently the Bank rate is 1% and Euribor goes from 1.50% in January to 1.70% in February and 1.90%, this difference is not always the same and in the last decade, removing years unstable crises, moving from zero to 0.75%. This tells us that the Euribor, which is the type that interests us because mortgages and contracts are indexed to it, can be higher or lower even without increases by the ECB.
Second, the problem of credit for the company is now more of availability and price of money, which in general is not the most significant within the cost structure of a company. As for mortgages, the price of housing has been high and credit is too low, and as it became obvious the interest rate has not taken credit risk. This leads us to consider the Euribor from a different perspective to the issue future loans will not be if it is higher or lower, but the differential is applied by the financial institutions will be around 4 or 5 %.
Another issue, and this would be the third point is whether it is justified to raise the reference rate by the ECB. The current inflation in the European economies is caused by increased energy prices, raw materials, basic foodstuffs, and elevation taxes. If this is so foolish it is to combat inflation that is not due to a pressure of consumer demand, raising the interest rate. The problem of raw materials and energy must be viewed from another perspective, and should not lose the nerves to the central banks.
Finally, strong increases Euribor have responded to fears among banks would not lend to each other. If the ECB decided nevertheless to raise the interest rate to 0.25% should take care not to stress liquidity in the interbank market, so that the spread between Euribor and the Bank rate was reduced, and increase will not affect mortgages and contracts subject to renewal. Thus the Bank could make the gesture of its willingness to fulfill its role as guardian against inflation, and avoid the higher cost of mortgages involving a decrease in the already weak consumer demand. Gumersindo
There are four issues directly related to Euribor are truths that we should not ignore. The first is that the relationship between Euribor and the rate of ECB is not immediate. Currently the Bank rate is 1% and Euribor goes from 1.50% in January to 1.70% in February and 1.90%, this difference is not always the same and in the last decade, removing years unstable crises, moving from zero to 0.75%. This tells us that the Euribor, which is the type that interests us because mortgages and contracts are indexed to it, can be higher or lower even without increases by the ECB.
Second, the problem of credit for the company is now more of availability and price of money, which in general is not the most significant within the cost structure of a company. As for mortgages, the price of housing has been high and credit is too low, and as it became obvious the interest rate has not taken credit risk. This leads us to consider the Euribor from a different perspective to the issue future loans will not be if it is higher or lower, but the differential is applied by the financial institutions will be around 4 or 5 %.
Another issue, and this would be the third point is whether it is justified to raise the reference rate by the ECB. The current inflation in the European economies is caused by increased energy prices, raw materials, basic foodstuffs, and elevation taxes. If this is so foolish it is to combat inflation that is not due to a pressure of consumer demand, raising the interest rate. The problem of raw materials and energy must be viewed from another perspective, and should not lose the nerves to the central banks.
Finally, strong increases Euribor have responded to fears among banks would not lend to each other. If the ECB decided nevertheless to raise the interest rate to 0.25% should take care not to stress liquidity in the interbank market, so that the spread between Euribor and the Bank rate was reduced, and increase will not affect mortgages and contracts subject to renewal. Thus the Bank could make the gesture of its willingness to fulfill its role as guardian against inflation, and avoid the higher cost of mortgages involving a decrease in the already weak consumer demand. Gumersindo
Ruiz.
(Grupo Joly 03/08/2011)
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