Mortgage margin hits the roof

The Spanish banks are already accepting that the profits they received in the last two years in the mortgage industry, with the increase in the price of money by the European Central Bank (ECB), have will rise to a peak after rising to 3 .71% at the beginning of 2024 and will remain stable in the first half. Everything suggests that the reduction of a quarter of a point last June is a return to normality and, although the price did not change at the meeting of the holder of the euro in July, although However, everything indicates that the cuts start in September. to be stable until it reaches 2.5%.

The entity chaired by Christine Lagarde always talks about working cautiously in monetary policy, taking into account Brussels’ inflation target of 2% in the euro area and, above its everything, taking into account economic indicators such as the GDP growth rate, salary increase. and other important values.

However, fears of a recession in the US as a result of wanting to push high interest rates too quickly led on August 5 to the collapse of the world’s main stock markets with the Nikkei 225 index losing 12.4% on the day. worst since October 1987, it has forced central banks to seriously rethink their strategy in order to cope with another global crisis of difficult proportions and provide some oxygen to families who are drowning in the face the high price of money.

In Spain, for example, a family that paid around 430 euros in their variable mortgage payment until last September, started paying more than 710 euros in less than year, that is, 280 more per month and approximately 3,360 euros per year. A figure that explains why the big national banks have suffered their highest historical profits until June, almost 40% more, while households had to tighten their belts to be able to afford the pay off their home loans.

In this context, the department recognized in the latest results presentations for the first half of the year that the progress of the mortgage finance margin has marked the highest level, precisely because credit performance is flat and expect it to continue to slide down. in the coming quarters due to forecasts of falling rates in the euro area.

Economists explain that, with the rapid increase in interest rates and its impact on variable mortgages, a good part of families turned to paying off debts quickly to reduce the impact of the increase in Euribor on limit their payments. According to the financial organizations, these payments were multiplied by three to four compared to the normal pattern.

Currently, the performance of the mortgage portfolio of the banks is losing steam. It has started to reduce due to the price war in new contracts and as a shift towards fixed credits in old operations which had been feeding the sector’s margin has gone out. ‘ despite the lowering that the Euribor has been pulling since October last year.

With this fact, organizations are aware that the highest profit figures of the six big banks in the country (BBVA Spain, CaixaBank, Sabadell Spain, Bankinter and Unicaja) cannot be repeated in the future, unless they make new formulas to encourage you. income.

gear change

The financial sector has been preparing for this situation for several years now with a significant gear change which includes ensuring profits by providing fixed rate mortgages. Therefore, as confirmed by the Spanish Mortgage Association, only 11.7% of the loans signed last June were granted at a real variable rate, that is, the highest fixed rate year , meaning that 55.3% of housing loans were given to them at a fixed rate. and only 30.8% with a variable fee between one and 10 years, and the rest was linked to the evolution set by the Euribor based on the evolution of the economy.

The situation that will open will benefit citizens who already notice a reduction in the reviews of their variable rate housing loans, which will allow them to improve savings and consumption.