27/10/2020 19:55
–
Taking out a mortgage has never been so convenient, thanks to historically low rates. This will facilitate not only those who want to buy a new home, but also those interested in replacing their financing through the subrogation. The Euribor rate (3 months), used for indexing variable rate mortgages, reached its historic low in mid-March, reaching -0.50%. Also in September it was traveling close to the lows of -0.49%. A sharp downward trend, considering that in July 2011 it was 1.60%, its maximum, and then fell below zero in May 2015. Also with regard to the Eurirs (25 years), the reference rate for the indexation of fixed-rate mortgages, we are witnessing an impressive contraction: in 2011 it was maintained at an average of around 3.4% and only in September 2013 it embarked on a long-term downward phase that brought it last July at an all-time low of 0.04% and now, according to the latest survey referring to September, it is around 0.06%.
The loan proposals of the banks are therefore interesting as never before, especially as regards fixed rates. A situation that should continue for the rest of the year. In the current socio-economic situation, taking into account the health emergency that is impacting significantly on the European economy, the ECB (which will hold the monetary policy meeting on Thursday) will take every possible action to maintain interest rates. reference to current levels. It has already announced that, if necessary, it will continue to inject liquidity into the banking system so that credit institutions can make mortgages and loans at very low rates. “In light of the agreement reached by European leaders regarding the extraordinary package of economic measures to counter the effects of the pandemic, this is the scenario that we should expect at least for the whole of 2020”, says the Tecnocasa research office.
Fixed or floating rate? According to the dynamics of the rates of April 2020, the amount of the monthly payment of a mortgage loan worth 110,000 euros for a duration of 25 years, assuming that the property is worth 160,000 € and that the average market spread is at 1% for both the fixed rate and the variable rate. With a fixed-rate mortgage, we would support an installment of 418 euros, about 26 euros more than we would have to pay if we chose a variable-rate mortgage, as its installment amounts to 392 euros. This clearly if rates always remained at current levels, which is difficult to verify in such a long time horizon. If you want to opt for the situation of greater savings, namely that of the variable mortgage, it is essential to understand how much the family’s income is able to withstand any installment increases, both in terms of repayment capacity and in terms of sustainability of the standard of living that you are used to having.
–
