Thousands of families in Spain await the escalation of the Euribor. The benchmark for most mortgages is at its highest since 2009, recording a daily rate of 2.2% and a provisional monthly average in September close to 2%.
The 12-month Euribor has been on the rise since April and has accumulated its highest rise in history so far this year. As a result, an average mortgage to be reviewed undergoes an increase of over 100 euros per month.
However, more than a million households have been protected from the rise in the indicator since the housing bubble burst thanks to fixed mortgages. According to INE data, between January 2009 and June 2022, the latest data available, In Spain, 1.17 million fixed loans were formalized for the purchase of housing. The figure represents 24% of all mortgages that were signed in that period.
Fixed-rate mortgages has grown steadily since 2014, when the recovery began after the economic and financial crisis, even if the big push came from 2016, coinciding with the banks’ strategy to lower the fixed rate supply.
Since January 2021, more than half of the home loans that have been signed monthly in Spain are fixed rate and So far this year its weight on the total has been over 70%. In other words, at least seven out of 10 mortgages that were formalized in the first half of the year were fixed-rate. The record was reached in April, when they came to represent 75.3% of the transactions entered in the Real Estate Registers, according to INE.
The bank makes fixed mortgages more expensive
In recent years, both banks and mortgage market experts have favored the negotiation of fixed mortgages, whose interest rates have reached historic lows compared to those of variable offers. However, in recent months the financial sector has raised fixed loan interest for new bulk deals and in many cases lowered the prices of variable mortgages.
as you remember Juan Villén, idealist / mortgage manager“The banks, given the increase in the cost of long-term loans, have been forced to make the conditions of fixed-rate mortgages substantially more onerous, and in many cases also to soften variable mortgages with reductions in the spreads that apply to ‘Euribor. Despite this, most customers still prefer fixed mortgages. According to the data we manage in idealista / mortgages, the negotiation of variable mortgages remains below 10% of the total, with almost no variation. Mixed mortgages have doubled, which now represent just over 15% of new mortgages, and the remaining 75% are still fixed ”.
If we look at the market data, we find that, on average, interest rates on fixed mortgages are currently between 2.5% and 3%, about double what they were a few months ago.
However, Villén states that “there are some banks that are ‘subsidizing’ tariffs to attract new customersand you can still find offers of less than 2% on the market, although they probably won’t last forever. “” Prices change constantly due to the extremely high volatility of long-term financing costs, “he adds.
An argument that also defends Leyre López, analyst and research team member of the Spanish Mortgage Association (AHE)which supports it “Financial institutions are currently busy adjusting their offer to the new interest rate framework, which naturally entails passing these rate hikes to fixed rate loans as well, making them somewhat less attractive. This does not mean that some offers are very favorable conditions, but the natural thing given the scenario in which we find ourselves is that many of the very competitive offers we found a few months ago have been withdrawn from the market ”.
Factors that influence the choice between fixed and variable mortgage
Experts insist it There is no perfect mortgage and that choice will depend on the particular situation of each consumerand factors such as your personal finances or how long you intend to pay off the loan.
“It all depends on the profile of the borrower and the current and future rate situation,” says the analyst from the Spanish Mortgage Association (AHE), while the idealist / mortgage experts point out that the key is whether the consumer “has a job. indefinitely, your salary, the greater or lesser amount that you have to finance from the purchase of the property, the term in which you want to pay the loan and whether or not you have the possibility of improving your financial situation in the future “.
In that same line, José Manuel Fernández, Deputy Director General of the Unión de Créditos Inmobiliarios (UCI), Remember that the decision to choose a mortgage or another depends largely on the personal and economic circumstances of each buyer, as well as their risk aversion.
In the fixed rate mortgages, “The buyer will always know the monthly installment to pay, avoiding possible increases deriving from the fluctuation of interest rates. In variable mortgages, on the other hand, the interest rate is defined by a differential that is added to the reference index, which is normally the Euribor. This means that the monthly payment can fluctuate after index reviews, although these mortgages usually have a lower interest rate at the time of stipulation than fixed mortgages, since the interest rate is higher the longer the duration. of the period at fixed rate rate. Therefore, he stresses, “it is a decision that depends a lot on personal factors, above all on the ability to resist a possible increase in monthly payments”.
The AHE analyst also offers another key to keep in mind: the term in which the consumer wants to pay the mortgage and any commissions he has to assume.
In this sense, López made it clear that, in a fixed-rate mortgage, “consumers should know that their price at the time of bargaining is usually slightly above the floating rate, but in return they are not exposed to the volatility of interest rates. interest in the market for the entire duration of the loan, which guarantees peace of mind and confidence to those more risk averse profiles. On the contrary, you must take into account that if you intend to make early repayments (partial or total) during loan, the costs that you will have to take on for this fact are normally heavier due to the financial loss that the bank could suffer if the market rates are lower than the remunerative interest “.
We remind you that, after the entry into force of the mortgage law in June 2019, banks have limited maximum fees that can be applied. In the case of a variable loan, the maximum penalty is:
- 0.25% of the amortized capital if the payment is made in the first three years of the life of the loan;
- 0.15% if it occurs between the fourth and fifth year. After this period, no commissions can be charged.
In fixed mortgages, on the other hand, the limit commission is as follows:
- 2% of the capital if the disbursement takes place in the first 10 years of the life of the loan;
- 1.5% later.
However, not all entities charge a depreciation fee. So, says the AHE analyst, “if you intend to make partial repayments or cancel your mortgage before it expires, this is something to consider.”
Finally, it is also recommended valuable bonuses offered by each entity, as well as compare different mortgage offers e negotiate the final terms with the bank of the loan, “since in most cases they change from the standard offer advertised by the banks”, they conclude from idealista / mortgage.
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