The Euribor falls like it has not done since 2012, how will it affect mortgages?

The Euribor gives a break and stops the rise that it has been experiencing since 2022 and that has had a hard impact this year on those who had variable rate mortgages. And the indicator has closed November at a provisional average of 4.027%, which represents a notable decrease of 0.138 points less than in October. However, the importance of the fact lies in the fact that there has not been such a marked drop since August 2012.

The Euribor closes lower after the European Central Bank (ECB) decided at the end of last month to stop interest rate increases, although it warned that they will remain high for “a sufficiently long period”.

The fall in the indicator represents the second monthly decrease of the year, although its reduction will not make the installments of variable mortgages cheaper.

What do the experts think?

As highlighted by the mortgage specialist of HelpMyCash, Miquel Rieraif the current trend of this index continues “It is likely that clients with a semi-annual review in December or January of next year will already start paying cheaper installments”.

For experts, the most foreseeable evolution of the Euribor places it in a scenario close to 4%. In the report with real data on the digital mortgages it manages Trioteca -a digital platform for online mortgages-, the economist Gonzalo Bernardos remember that «In 2007 the average interest rate on invariable mortgages stood at 5.45%, an amount slightly more than half a point higher than that of State obligations between 30 and 50 years (4.77%). However, this rule has been broken in 2023..

In this sense, during the last month 50.7% of the mortgages signed on the platform have been at a fixed rate, 45.7% at a mixed rate and 3.6% at a variable rate. The increase in the Euribor has generated continued interest in fixed rate mortgages. Despite this, there are a significant number of people who opt for mixed rate mortgages.

What is the profile of the homes purchased?

Regarding housing prices, the downward trend in housing prices persists, registering a decrease in the average value of homes purchased in November, which stands at €189,000.

For Richard Garrigageneral director of Trioteca, «The sharp drop in house prices is the direct consequence of the large rise in interest rates by the ECB. A higher interest rate allows for less debt and causes a lower willingness to pay for a home.”.

Source: Trioteca Study Center.

Among the properties acquired through the platform, second-hand homes predominate, accounting for 98.27% of the total. Thus, only 1.73% corresponded to new construction homes.

How has the rise in mortgages affected Spaniards?

25% of citizens in Spain who have a variable or mixed mortgage allocate 35% of their salary to paying the monthly payment, which shows a growth of 12% in one year after successive increases in interest rates, according to the real estate portal photo house.

In this sense, the rise in interest rates has triggered an increase in the payment for nine out of ten mortgage holders with mixed or variable modality, according to the analysis of the real estate portal carried out on 5,000 people between August and September 2023.

This “large disbursement” causes the loss of purchasing power and increases the risk of non-payment for families. For their part, the 16% who declare themselves the most affected by this increase in fees are those with incomes between 1,001 and 1,500 euros, while 13% are those who earn between 1,501 euros and 2,000 euros per month. Only 3% with salaries of 5,000 to 8,000 euros are affected by the mortgage increase.

The number of mortgages decreases

The home mortgage firm fell 29.6% year-on-year in September, to 31,054 loans, the largest decrease since January 2021 and the seventh consecutive double-digit fall, a consequence of the rise in interest rates and also the less dynamism of the housing market.

In fact, the average interest applied by entities to new mortgages on homes rose to its highest level since January 2016, 3.26%, more than one percentage point more than a year before, according to data published this Tuesday for the National Institute of Statistics (INE).

But that 3.26% was also almost one point lower than the Euribor in September, which stood at 4.149%, still in full bullish rally, which is already beginning to slow down.