What is the Euribor?

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Hasta aquí todo suena muy interesante, pero tal vez no muy relevante para la gente normal, a pesar de todo la realidad es que afecta tanto a persons normales como a los propios bancos, veamos el porqué de esto.

The relevance of the Euribor

The Euribor We already understood it as the interest rate that a bank must meet in terms of loans made by another bank. But where does the bank that requested the loan get the money to pay the interest? The solution is for the end users of said money, we are the people who request loans from the bank, it is fundamentally important for those who demand mortgage loans.

So that the bank can be sure that it will have the solvency to be able to cover the expenses caused by the loan requested from another bank, it does the calculation of the mortgage interest rate based on Euribor. From this dynamics, calculate the rate by applying the Euribor to six months or one year on other occasions.

This means that the el banco ofrecerá al Username final, a mortgage interest rate based on at Euribor value que está en vigor; de modo que, si es mayor, mayor será la tasa de interés que se aplicará. Este punto es sobre todo importante para quienes demandan un préstamo a tasa variable, puesto que en estos casos la tasa de interés que provenga de tu préstamo se verá afectada ya be positiva o negativamente, causando que tengas que pagar más o menos intereses.

It should be noted that to offer an end user fee, el banco suele aplicar un diferencial que oscila entre 0 y 1,5; Lo que definirá esta diferencia son dos cuestiones principales; lo primero es el perfil económico del client. El motivo que esto influye en el diferencial es la misma razón por la que varía la tasa interbancaria, la confianza que el banco tenga en el usuario definirá en gran medida si se suma un diferencial mayor o menor.

The second aspect that influences the decision of the spread to apply is the user's own negotiation capacity, and even when it seems almost impossible, in fact there are certain fundamentals that we can use to reduce the spread that will be applied. to our mortgage.

Finally, it is important that if we have a mortgage credit or if we are thinking of applying for one, we must always pay attention that the simulation of our credit is not reliable or accurate; Since the calculations are made daily, so if the Euribor increases, the quota that we have to cover for the mortgage becomes more expensive, on the other hand, if the Euribor goes down, our quota would also go down.

Another reason being provided special attention to the value of Euribor is that it is used as the basis for calculating the value of certain financial instruments. As an example, this value is used as a reference for practically any type of derivative products such as income from futures or swaps, as well as agreements on all future interest rates.

Undoubtedly the The Euribor is a fairly important indicator for everyone, tanto para gobiernos e organizaciones financieras, como para la gente corriente. De ahí la relevance de que como usuarios finales sepamos de dónde viene y cómo nos afecta en la vida diaria. ¿Pero tiene limitaciones?

The main limitation of this financial reference is that it only applies to banks belonging to the European Union, so if we intend to perform the calculation for another region, we will have to apply the reference used by that locality. To give an example, to be able to perform the calculation in the United Kingdom, the reference that we would have to use is the LIBOR, which has the same function as the Euribor, but in the London area.

It is also feasible that we consider that in order to compare the financial health of one region with respect to another, it is feasible to compare their interbank offers; in general one of the most common comparisons or references is that of Euribor with LIBOR.

The manipulation of the Euribor

Although the entire system is designed to work for the benefit of both organizations and end users, there have been occasions when the personal interests of certain individuals have intervened in such a way that the Euribor values, Knowing a little about this history will help us better understand the weaknesses of this system. And how what happened in the past has been corrected.

Since the year 1999 when the Euribor came into force, until 2012 everything indicated that the Euribor was ideal, despite everything, it was on February 22 that two renowned lawyers denounced that there was opacity in the type of mortgage placing special emphasis on the Euribor; The main reason for this complaint was that no one was auditing its composition, so the Euribor remained sensitive to possible manipulations.

And actually in 2011 an investigation had been opened on the possible manipulation that could occur; The Euribor case is not isolated, but banking organizations were also fined in other parts of the world, such as Canada, where HSBC, JPMorgan, Royal Bank, among others, were fined.

Completion of the investigation culminated in the execution of fines by different banks, fines that amounted to 1,710 million euros. The banks that were sanctioned were 6. Undoubtedly, this situation is regrettable, since the most important thing is that the finances of the users were directly affected by the interests of those involved.

A bit of the history of how the Euribor has performed gives us an indication of what would be ideal; And it is that during its first years what was observed is that its behavior is descending, in spite of everything it was until 2008 when an increase in the interest rate was observed in a substantial way; even reaching a value of 4,42%, which is quite a lot if we compare it with its historical lows, which were reached in 2015, where the value was 0.165% in the month of May of that year. Undoubtedly, it is interesting to see the behavior of the past and analyze the situations that have involved the Euribor and its behavior, so that whenever we want, we can observe and understand why said interest rate shows a certain behavior.