Euribor Woes

Over the last few months I have developed an unhealthy obsession with the Euribor. For those of you who live in blissful ignorance of this term, Euribor stands for the Euro Interbank Offered Rate. Basically this is the interest rate banks in the Eurozone use to lend each other money. More importantly for me, the Euribor is also the reference rate used by almost all Spanish banks (including my own beloved Caja Duero) for calculating how much us mortgage holders have to pay each month in order to keep our homes. The interest rate for my particular home loan is set at Euribor + 0.25 and is revised once a year based on whatever the Euribor happens to be at the time of my revision. When my husband and I purchased our sweet little flat in March of last year, the Euribor was at 4.44 % and, thanks to the recent global financial crisis, the rate has skyrocketed to its current 5.512 %.

Against such a promising backdrop, I’m sure you can imagine how easy it was for me to slip into consulting this oracle of financial wisdom on a daily basis in order to determine, and therefore try to prepare for, the fate which awaits us on Revision Day in March. But yesterday a ray of hope (or so it seemed) somehow broke through this dismal forecast, and I promise you that I almost cried for joy when I heard that the European Central Bank had finally agreed to throw us a bone and lower interest rates by half a point. News reports all across the country promised that this decision would also produce a reduction to the Euribor, thereby saving millions of homes from foreclosure and families from subsisting primarily on rice and lentils. You could almost smell relief in the air.

So can somebody please explain to me why the Euribor not only showed no signs of drastic reduction but, in a sick twisted plot against all that is right and good, the banks actually decided to kick things up a notch and raise the Euribor? I’m no financial expert, but I have been reading articles written by "top economists" for months, all of which swore by the formula: ECB lowers interest rates = Euribor goes way down. Some of these “experts” even went so far as to say that even insinuation by the president of the ECB that interest rates may be lowered would be enough to shave some tenths of a point off the thing. Well guys, at least in the short term, I guess you were wrong.

So that’s it, I surrender. For my own sanity, I hereby renounce the unholy oracle that is euribor.com. I will no longer set myself up for suffering at its cruel hands. As a concession to necessity, I will keep reading the headlines, but I will not even try to figure out why the global economy seems to be slipping and a sliding into a pool of disaster. He dicho.