choose one mortgage It is one of the most important financial decisions, given that it is a very long-term product and that it covers a large part of the family budget. Opt for a mortgage fixed or variable It is the eternal dilemma and just at a time like the present, in which interest rates are rising, even more doubts arise. In collaboration with the Association of Financial Users (Asufin), the expert in financial products Antonio Luis Gallardo Sánchez-Toledo offers the keys to know what is best.
Gallardo assures that, from the start, “the best mortgage is the cheapest”. However, several factors must be taken into account, such as the consumer’s profile, whether they are looking for more price or security, and the link.
The expert explains that fixed mortgages offer stability in payments since the installments are invariable throughout the life of the loan. They do not depend on the fluctuations of interest rates, as it happens in variable mortgages, which are mostly referenced to the Euribor index. In recent years, variable loans have benefited from negative rates. Meanwhile, banks reduced fixed prices to make them more attractive and competitive. However, the market has changed. Now, the Euribor is rising and makes variable installments more expensive. In turn, entities begin to raise fixed rates. What to do in this context?
In Gallardo’s opinion, “in times of rate hikes, a fixed mortgage may be better”, although he warns that “the banks are not sitting still and are very quickly transferring the increase in rates to fixed mortgages”. According to his calculations, from December 2021 to March 2022, fixed mortgages have risen by 0.38% on average compared to the 0.63% increase experienced by the Euribor. The expert foresees that the 12-month Euribor, which in April entered positive for the first time since 2016, will continue to climb and by the end of the year it will be “at no less than 0.6%”. The provisional average for May is already above 0.25%.
Fixed-rate mortgages have been gaining prominence and, although in February 2012 they barely accounted for 5.8% of all contracted housing loans, they now represent more than 76%. “This is a rise of 71%,” says Gallardo, who states that the fall in interest rates and “massive marketing by financial institutions” explain the change in preferences by users. He highlights, however, that during the 2017-2022 period, fixed mortgage holders have paid an average of 1.8% more than variable mortgage holders.
In any case, when opting for one or another mortgage, Gallardo maintains that “the client has to monitor all aspects and not get carried away only by the security of the fixed rate or by prices.” At this point, he advises to take into account the links and “run away” from them. He assures that “to get the best interest rates, banks offer all kinds of links that can raise the total disbursement.” Entities usually request the hiring of insurance, alarms or contributions to pension plans, among other products. “Optional bindings are an increasingly important claim,” he says.
According to a recent analysis by Asufin, discounted mortgages, those that offer lower interest in exchange for a certain relationship with the entity by the client, can be up to almost 2,000 euros more expensive than mortgages of the same amount without connection.
The ideal, beyond the fixed or variable rate, is to “make accounts” to know what is going to be paid, they conclude from Asufin. And Gallardo recalls that one way to compare mortgage products between entities is with the APR. The equivalent annual rate on mortgages is an annual percentage that indicates the effective cost of the mortgage, including the interest rate, but also bank fees and commissions.
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