The benchmark index of mortgages is crucial for the calculation of the interest rate on variable and variable rate loans and mixed rate loans. A fixed rate, never changing during the term of the loan. What are these clues, how are they fixed, how can we see them clearly?
The main indices currently under way
The most commonly used benchmark since the changeover to the euro has been Euribor (Euro Interbank Offered Rate)
It's the short-term money rate practiced between banks in the euro area. There are two main variants: the 3-month Euribor and the 12-month Euribor. Swap 3 years / 5 years / 7 years / 10 years are also in force.
These indices are used to calculate the interest rate of a variable rate, revisable or blended rate loan. Always add the margin earned by the bank. This one is fixed and depends on your profile. It will be even smaller than your bank considers it good. This interest rate represents a portion of the overall loan cost or TEG: the overall effective rate.
If you decide to move from a floating rate to a fixed rate, provided that this clause is stipulated in the loan agreement, then the indexes used are the long-term private sector rate 1st end of month balance or the TMO
To know: The Euribor is also called Tibeur in its French translation (Interbank Rate Offered in Euros) and replaced the Pibor (Paris Interbank Offered Rate) or Tiop (Interbank Offered Rate in Paris).
Fixed rate, revisable rate, variable rate, some reminders
The fixed rate of a home loan depends on the long-term market and can be modified during the term of the loan. This is the choice of security since you are immune to a rise in interest rates.
The floating rate tracks the change in a financial index at each maturity. While the revisable rate varies only after a reference period (generally one year) depending on the overall evolution of the benchmark.
According to the formula provided for in the loan agreement, in the event of a rise in the revisable or variable ratethis can first be passed on over the term of the loan, which can be extended by up to 5 years, with constant monthly payments. If the adjustment of the duration is not enough, the amount of the monthly payments is increased. In the event of a rate cut, the duration of the loan generally decreases.