Euribor. A word you have heard on the news, read in the papers, and mentioned over coffee. Most people know it is “something to do with loans” and that it “went up”. But what is Euribor really? And more importantly — why did it raise your loan payments?
Euribor = Euro Interbank Offered Rate
Euribor is the average interest rate at which European banks lend money to each other. Imagine a bank in Zagreb urgently needed €10 million for a week. It would go to another bank and ask: “Can you lend me the money for 7 days? How much interest?” The average of those rates — that is Euribor.
Euribor is calculated for different terms: 1 week, 1 month, 3 months, 6 months, 12 months. For Croatian loans, the most common is the 6-month Euribor — and it is the one that raised rates for millions of Croatians.
How does Euribor affect your loan?
Most mortgage loans in Croatia have a variable interest rate. Your installment consists of:
Installment = (Euribor + bank margin) × loan amount
When Euribor rises, your installment rises. When it falls — your installment falls. Simple.
Example: You took a €100,000 loan over 25 years in 2021. The 6-month Euribor was -0.5%. Your installment was around €370. Today, Euribor is around 3.5%. Your installment is now around €540. That is €170 more per month — €2,040 per year, €51,000 over the remaining 25 years.
You did nothing wrong. Euribor just went up. But you live in a world where your interest rate changes without asking you.
Why did Euribor rise?
The European Central Bank (ECB) raised key interest rates to tame inflation. Short version: when inflation is too high, the ECB raises rates to slow the economy. This pushes Euribor up. Which pushes your installment up.
From July 2022 to September 2023, the ECB raised rates 10 times in a row — from 0% to 4.5%. The fastest and largest rate hike in the history of the euro. Result? Euribor jumped from -0.5% to over 4%.
What can you do?
- Refinance your loan — if you have a good credit history, you can switch banks and get better terms.
- Fix your rate — some banks offer switching from variable to fixed. You will pay a higher margin, but you stop worrying about Euribor.
- Wait it out — analysts predict Euribor will fall during 2025 and 2026 as the ECB cuts rates.
Conclusion
Euribor is not your enemy. It is a mirror of the European economy. When the economy is hot (inflation), Euribor rises. When it cools, it falls. The problem is that Croatian citizens have gotten used to a Euribor that was negative or near zero for the last 20 years — and forgot that rates can also go up.
Lesson: when taking a loan, plan with a margin. If the installment is €400 with today’s Euribor, ask yourself if you can handle €600 if Euribor jumps again. If not — maybe the loan is too big.
This article is for educational purposes and does not constitute financial advice. Consult a banking advisor before making loan decisions.