The Rising Euribor: What it Means for Variable Mortgages

He euribor It doesn’t let up in September either and continues its meteoric rise. Consequently, people with a variable mortgage, in which the payment to be disbursed is subject to an indicator, are following the evolution of this index with great expectation.

For this reason, while those mortgaged who are repaying a loan at a fixed rate breathe easy, because they will not suffer changes in their payment, those mortgaged at variable type They wonder how the new attack on the Euribor will impact the amount to be paid.

How much does the Euribor go up?

At the end of September, the Euribor has climbed to 4,150% In September. The percentage shows a slight increase compared to the result achieved the previous month, in August, when it stood at 4,073%although it is at similar levels to those recorded during the month of July.

However, if the figure is contrasted with those recorded in previous years, it becomes clear that the reference rate used by the majority of variable rate mortgages in Spain has skyrocketed to maximums that have not been reached since November 2008as reflected in the data collected by Europa Presswaiting for the Bank of Spain (BdE) to definitively confirm the result.

Containment of inflation

The rise of the Euribor is part of the successive increases in interest rates that the European Central Bank (ECB). The reason behind this policy is none other than to stop inflation, that is, to ensure that prices rise less. However, it also leads to an increase in the cost of mortgages, as well as a greater profitability of fixed deposit terms.

After the last increase promoted by the financial institution chaired by Christine Lagardethe price of money has been at the highest level in the last 20 years.

Specifically, it has raised interest rates in 25 basis pointsso that the reference rate for its refinancing operations will be 4.50%, while the deposit rate will reach 4% and the loan facility rate will reach 4.75%.

How it will impact mortgages

The impact on families’ pockets, despite the increase in interest rates, will be less than what they have experienced in previous months. Taking into account that between January and March 2022 the Euribor was in negative figures, those who reviewed their mortgage taking the same months of this year as a reference were forced to face an increase in interest rates of around 4%.

Those who review the fee in September could experience an increase of 167 euros per month

However, people who review their mortgage loan with the indicator in September will experience an increase of less than 2%, since at this time last year, the European monetary authority had already faced several interest rate increases, which were was reflected in the markets and led to an increase in the Euribor of 2,6%.

Consequently, a person who has contracted a mortgage with a variable interest rate, an amount of 150,000 euros, a maturity period of 30 years and a differential of 0.99% plus Euribor, who has to review the installment in September would experience a increase in your mortgage payment 167 euros monthly.

Change mortgage

With this hopeless panorama, there are many mortgaged to variable type who are considering changing their mortgage. One of the options for this is novation, a process that involves negotiating a change in the conditions of the mortgage loan with the financial institution. Specifically, the interest rate is renegotiated, so that it goes from variable to fixed.

Another possibility is subrogation, which consists of change the mortgage of bank. Although it may be a somewhat more expensive solution, if it is carried out to change the interest rate from variable to fixed, the costs are subsidized by the Government, within the framework of the aid to mortgage holders promoted last year, as and how the portal describes Kelisto.

Finally, those with variable rate mortgages can opt for cancel the mortgage and take out a new mortgage loan at the same bank or another financial institution. It may be an interesting option for clients of banks that do not allow subrogation of the mortgage, although it is worth keeping in mind that cancellation may be more expensive than changing conditions.