The entities change their strategy and bet on variable credits at the end of the era of cheap money
Loans that vary their rate conditions reached record numbers in the first quarter, with increases of 20% compared to 2022
The escalation of the Euribor causes increases in mortgage payments that reach 37% in the youngest loans
The trend spread to ‘live’ loans, that is, to those previously signed. Between 2021 and 2022 about 88,000 mortgage holders they went to their banks to request a change in the interest rate conditions of their loans. A figure that doubled the usual requests of previous years.
So, in the first quarter almost 14,000 mortgages negotiated and they closed an agreement with their entities to modify the interest rate of their credits, according to data from the National Institute of Statistics (INE).
A record number, and by far, since was 20% higher than that registered in the first three months of 2022 and 2021.
change of strategy
This boom in fixed-rate loans to buy a home was fueled to a large extent by the financial institutions themselves. Those interested in gaining market share saw a great opportunity in this market and launched with aggressive and interesting offers.
But the era of cheap money has just come to an end. And the bank has rethought its strategy. Your bet from now on is the floating rate which, as official interest rates rise, it generates higher margins.
In view of the data, this maneuver is having an effect. The percentage of mortgages that are modified by registration for reasons of interest rates has dropped to 32%, when months before they were close to 40%. And the Variable-rate mortgage loans now account for 36% of the total of new operations, its highest in almost two years.
On the contrary, fixed-rate loans have become more expensive, present fewer offers and have lost prominence since the rise of the Euribor began.
Greater attractiveness
In the midst of this financial war for assets, clients have been able to benefit from better conditions for their mortgages. Before with attractive fixed rates that they could take advantage of.
And now with offers that alleviate, in part, the double ‘penalty’ of variable-rate loans. On the one hand, due to the direct effects of the rise in the price of money on their monthly installments. And, on the other, due to the repayment system itself, whereby the greatest interest burden is concentrated in the first years of the loan’s life.
Impacts of the rate hike on the quota
The rise in the one-year Euribor, which is the main reference in variable-rate mortgages, implies a general increase in quotas paid by the millions of Spanish mortgage holders. However, depending on the life of each loan, the effect can range from a slight rebound or a strong rise.
According to calculations by the Spanish Mortgage Association (AHE) on a “standard loan” -of 150,000 euros in capital, with a term of 25 years and a variable interest rate of Euribor + 1 point- the rise in the price of money up to 3.5% can trigger the annual fee up to 37% in the youngest loans. And only 5% in those that are close to their amortization.
- In euros, if this ‘type’ mortgage was contracted in 2022, the increase would be 37% in the monthly payment (about 237 euros).
- If it was signed in 2011, the increase would be 20% (around 137 euros, according to the average rates for that year).
- Less penalty occurs among the ‘older’ credits. If the mortgage was contracted andn 2003, the annual quota increase would be 8% (about 59 euros each month taking into account the level of the price of money 20 years ago).
- In the event that the firm had been produced in 2001, it would already be about to be amortized, and the increase would be 5% (less than 45 euros).
Minimize costs
The train to get a mortgage at a very attractive fixed rate has already left. now remains tie yourself to the best variable conditions offered by the market, to minimize the extra cost generated by the escalation of official interests.
As long as inflation remains high, rates will not go down. And although in Spain prices are beginning to slow down, in other countries, such as Germany, they are still at high levels. Let’s not forget that the Germans have a lot of weight in the monetary policy of the European Central Bank, which is the one that decides the course of the price of money in Spain.
2023-06-12 00:04:47
#bank #stops #rise #fixedrate #mortgages
