Euribor is the most common reference rate
The Euribor (Euro Interbank Offered Rate) is a reference interest rate in the euro area money market. It is commonly applied to loans and deposits. The rate’s name indicates the period of time during which the borrowing rate remains unchanged: either 3, 6 or 12 months. For example, the interest rate of a loan tied to the 12-month Euribor remains unchanged for 12 months, while a 6-month Euribor loan is adjusted every 6 months from the loan drawdown date.
Euribor rates are quoted daily at 12.00 Finnish time. A new interest period will begin on the interest rate adjustment date. The new total interest rate consists of a margin and the reference interest rate on the interest rate determination date. The interest rate determination date is the banking day before the interest rate adjustment date.
For the latest news on Euribor rates, visit the Bank of Finland website.
Benefits of the 12-month Euribor
The 12-month Euribor is the most popular reference rate for home loans in Finland. Its biggest benefit is its predictability. It is easier to plan your finances when you know what your loan interest will be for the next 12 months.
The 12-month Euribor responds to the rises and falls in interest rates more slowly than short-term interest rates. This means that if interest rates start to rise shortly after the rate adjustment, the 12-month Euribor protects borrowers from higher interest rates for a longer time. On the other hand, borrowers may have to wait longer to benefit from falling interest rates.