Euribor Exceeded 3% Threshold: Should You Postpone Buying a Home?

The six-month euribor exceeded the 3% threshold again, rising to 3.013%. Should you postpone buying a home now and wait for lower interest rates? According to Anne Pärgma, head of home loans at Swedbank, a long-term home purchase decision should not be made based solely on the current state of euribor.

A home loan is a long-term obligation and at Swedbank it is taken on average for 28 years. During this time, interest rates will both rise and fall. For example, three years ago, the six-month euribor rose above 4% for a period of time.

The impact of interest rate changes is shown by a simple calculation. For a home loan of 150,000 euros over 28 years, with a euribor of 3% and a margin of 1.45%, the monthly payment would be approximately 782 euros. If euribor increased by 0.25 percentage points, the monthly payment would increase by about 22 euros to 804 euros. If euribor reached 4% again, the monthly payment would increase by approximately 89 euros compared to 3% euribor, bringing it to 871 euros.

"If a person needs a home and their financial situation allows them to buy one, then now is the right time to buy a home. The decision should not be made solely based on where euribor currently is or whether we hope it will start falling soon. It is more important to look at your own needs, income stability, existing obligations, and whether the loan payment leaves enough room in your budget for other expenses and unexpected costs," said Pärgma.

Postponing home purchase does not necessarily mean that the transaction will be cheaper later. During the waiting period, you will continue to pay rent while living in a rental apartment, and in the longer term, real estate prices have generally increased. So it may turn out that while waiting for interest rates to fall, the home purchase will not become cheaper in the end.

"A home loan is more of a marathon than a sprint. If there is a need for a home and the loan is affordable, then you should not tie a decision made for decades to what the euribor is at the starting point," said Pärgma.