What is Euribor plus?

We explain to you what this update of the Euribor consists in and how it affects mortgages
Euribor plus is an update to how the current Euribor is calculated. After experiencing several delays since 2016, it is expected to go into effect in late 2019, though a final implementation date has yet to be announced.
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In the words of the body in charge of changing it, the European Money Markets Institute (EMMI), Euribor plus represents a “reform” of the classic Euribor. As a result, we can't speak of a new benchmark index, but rather of an update to the current one. At present, the Euribor is calculated on the basis of the average rate at which European banks lend money to one another, throwing out the 15% highest values and the 15% lowest values.

However, this method is likely to be improved, according to the European Money Markets Institute. This is the main reason why, for several years, work has been ongoing on a new formula to stabilize changes in the Euribor. In this way, Euribor plus will take into account more details for its calculation.

How will Euribor plus be calculated?

The current Euribor calculation relies on data from 20 banking institutions, a sampling of the group of main financial institutions operating in the euro zone which, according to the experts, has become too small. For this reason, Euribor plus will include the data and references not only of a larger number of banks but of other actors, such as public bodies, multinational corporations and insurance firms from the financial world, among others, which will contribute their data to help establish the new calculation of the benchmark rate.

In addition, in the event of not reaching the desired sample on the volume of market transactions, the information will be completed with data of previous days, a technique known as “gap filling”.

With all these transactions in hand, an average will be calculated that more reliably reflects the ‘price of money’.

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Who will be affected by Euribor plus?

At first, Euribor plus will be used for variable interest-rate mortgages that use the Euribor as their benchmark rate.

Before it goes into effect, however, scheduled for late 2019 (though no official date has been announced), it will undergo a testing period to verify its efficacy. The idea is that this new index will help to set a more stable price of a mortgage, so any anomaly in its evolution will be detected and corrected before its full entry into operation.

It is still too soon to know how the entry of Euribor plus will affect current and future mortgages, but the European Money Markets Institute has announced that it is collaborating with organisms and financial institutions so that this update of the most important reference rate in Europe will be beneficial for society as a whole.

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