What is Euribor?

What is Euribor?

Euribor (the Euro Interbank Offered Rate) is the average interest rate at which a panel of large euro-area banks is willing to lend money to each other, unsecured¹. In other words, it is the "price" of money on the European interbank market.

For most people in Portugal, Euribor matters for one very concrete reason: it is the index that makes the mortgage payment rise and fall. Almost every Portuguese mortgage is variable-rate, indexed to Euribor.

Who sets Euribor?

Euribor is calculated and published every business day by the European Money Markets Institute (EMMI), from the rates reported by a panel of banks¹. No single bank sets it on its own, and it is not set directly by the European Central Bank, although the ECB’s monetary-policy decisions (raising or cutting its rates) strongly influence where Euribor moves.

What are the Euribor maturities?

Euribor is not a single number: it is published for several maturities, reflecting the horizon of the interbank loan¹, 1 week, 1 month, 3 months, 6 months and 12 months.

In Portuguese mortgages the most common are the 3-, 6- and 12-month rates. The maturity in your contract sets how often the rate is repriced: with 6-month Euribor the reset is half-yearly; with 12-month Euribor, annual.

What is the difference between Euribor and the spread?

This is the most common confusion. On a variable-rate loan, the interest rate you actually pay, the TAN (nominal annual rate), has two parts²:

TAN = Euribor (market index, changes) + spread (the bank’s fixed margin)

• Euribor is the same for every bank at the same maturity and changes over time.
• The spread is the fixed margin each bank adds, set in the contract; it does not move with the market.

So when you compare offers, what differs is the spread (and the commissions and insurance). Euribor is the same for every bank at the same maturity. You can estimate the resulting payment in our mortgage payment calculator.

How does Euribor affect the mortgage payment?

On a variable-rate loan, the monthly payment is computed with the TAN on the outstanding balance. When Euribor rises on the reset date, the TAN rises and the payment goes up; when it falls, the payment goes down. The effect is bigger the larger the balance and the longer the remaining term.

Worked example

Take a €150,000 loan over 30 years, with a 1.0% spread:

• With Euribor at 2.5%, the TAN is 3.5% and the payment is about €673.57 a month.
• If Euribor rises 1 point (to 3.5%, a 4.5% TAN), the payment becomes €760.03, €86.46 more a month.
• If Euribor falls 1 point (to 1.5%, a 2.5% TAN), the payment drops to €592.68.

See the impact on your own figures in the mortgage payment calculator, which shows the payment and how much it changes with Euribor at ±1 point.

How often does Euribor change on my loan?

Published Euribor moves every day, but your loan is only repriced on the agreed date. With 6-month Euribor the rate is updated every 6 months; with 12-month Euribor, once a year. Between resets, the payment stays the same, even if market Euribor moves. That is why two people with the same loan can pay different amounts depending on the date of their last reset.

Can Euribor be negative?

Yes, and it has been. From 2015 to 2022, Euribor sat at negative values, which lowered many payments (in practice the interest came down almost to the spread alone). It then rose sharply as the ECB raised rates. The lesson is the same: on a variable rate, the payment is not fixed, so it is wise to keep budget headroom for a rise.

Once you understand Euribor, the natural next step is to see the numbers for your own case: try the mortgage payment calculator or, to see how compound interest grows (or costs) money over time, read what is compound interest.