What is the EURIBOR anyway?

The EURIBOR (Euro Interbank Offered Rate) is the main index against which French banks set their variable rate loans. For variable rate loans in the UK we generally use the Bank of England base rate plus a margin (the banks charge for lending the money). Linking rate changes to the main bank index makes it easier to judge when rates change.

By comparison, in France, variable rate mortgages are linked to an Euribor. There are Euribor rates ranging from 1 month to 1 year, the one day Euribor being the lowest and the 12 month the highest (1.2%). Most banks use the 3 month Euribor, for variable French mortgages which currently stands at 1.18% as we can see from the French market trends box. To this rate of 1.18%, French banks add their margin. The average margin is currently 2%, which if added to the 3 month Euribor today gives a variable rate of 3.18%. The Euribor is calculated as a daily average of lending rates by a sample of 57 of the most active banks in the Euro zone and broadcast at 11am im the morning. In practice, the main changes to the Euribor rates come only when the main ECB rate changes. Banks usually use the average of the last quarter when calculating and applying any changes to your rate.

It is always important to check which Euribor rate as well as the margin added to your loan and to compare likefor like as a loan with a lower margin might be based on the much higher 12 month Euribor.

Posted in: French mortgage guides