Faq

Financial

  • Which reference rates are used to calculate the interest on a loan?

The most common type of interest rates are those referenced to the EURÍBOR, to the Mortgage Loan Reference Index (IRPH) of savings banks, banks and the rest of entities, and the Spanish Confederation of Savings Banks (CECA). To these indices, which the Bank of Spain officially publishes every day, it is usual to add a differential, and the result is the rate of interest applicable on the loan when it comes to making your payments.

1. Euríbor: According to the Bank of Spain, it is defined as the simple mathematic average of the daily values in the market the days it is open over the period of a month, the rate used by the European Banking Federation for its operations depositing euros for a year calculated on what is offered over a sample of banks for operations between entities of similar qualification. In practice, the calculation is based on the prices offered for mortgage loans made by the top sixty European banks.((see history)).

2. IRPH Banks: Is published by the Bank of Spain and is calculated through the simple mathematical average of the interest rates on mortgage loans of over three years that the banks have set up or renovated during the month. It is usually quite a lot more than the Míbor or the Euríbor, for that it is logical that the differential to be added must be lower than the differential applied to the Euribor. It is an interest rate that suffers slow increases and reductions on the real price of money. (see history).

3. IRPH Savings Banks: Is identical to the above but refers to loans made by the Savings Banks. It tends to be a little higher than the Banks(see history).

4. IRPH Group of Entities: Is identical to the above but refers to loans made by the group of Banks, Savings Banks and Building Societies (see history).

5. CECA index: Is the index created by the Spanish Confederation of Savings Banks. It could be defined as the average rate calculated from rates applied to the operations on personal loans of between 1 and 3 years, and of loans with a mortgage guarantee for obtaining a home for a period of over 3 years, eliminating in both cases the extreme values (see history).

6. Míbor for a year: It was the reference most used for mortgage loans with a variable rate, now substituted for the Euribor. Roughly speaking it could be defined as the rate used between financial entities when they lend money to each other on the interbank market in Madrid. For this, it is normal practice to add a differential to the Mibor, given that that is what the financial entity gains from the operation, which is receiving money from Míbor and lends it to Míbor plus the differential, which is where it gains. The calculation is based on the simple mathematical average of the daily interest rates of those who have cleared operations of a year long period in the interbanking market, during the working day of the legally corresponding month. Of the operations that are cleared, they exclude those that have been made at rates obviously far from the general tonic of the market. The daily rates are made up of pondered medium rates for the amount implied in the operations carried during that day.

This rate is highly volatile and is very tightly fixed to the realities of the market. At the moment it is not used as a reference for new loans, but exclusively as a reference to those that were already in place before the appearance of the Euríbor.





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