The Rise in Euribor Pushes Mortgage Installments Up by 38%

The punishment that the rise in the Euribor is inflicting on the pocket of more than 3.7 million mortgaged A variable interest rate does not loosen. After touching its historic lows in January last year and reaching the -0,504%the main index for calculating mortgages in Spain has risen to close July at 4.149%and 318% more compared to the same month last year.

This figure, the highest in 15 years, has meant that the mortgages that are reviewed in August are make it more expensive by 38%. Thus, for an average mortgage, the fee will rise by 231 euros per month and 2,777 euros per year, calculates Stephanie Gonzalezpersonal finance spokesperson for Kelisto.

This rise makes it difficult for many owners to face the increase in their fees. To facilitate your payment, you can take advantage of alternatives ranging from change from variable to fixed or mixed mortgageuntil pay off early your debt, apply for aid to mortgages approved in 2022 by the Government, extend the term or negotiate a lack.

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These alternatives have made the mortgage renegotiation has risen by 204.87% in the first half of this year compared to the same period in 2022, making the total amount renegotiated reach the 2,192 million euros, a figure much higher than the 719 million in the first six months of 2022, according to data from the Bank of Spain, .

In this scenario, “many mortgagees have tried to reach an agreement with their banks to soften the rise in their installments and many of them have managed to renegotiate their conditions successfully,” he points out. Miquel RieraHelpMyCash mortgage expert.

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One of the strategies preferred by mortgagees to mitigate the rise in their installments is the transfer of their variable mortgages to fixed ones. Although the latter have been between 54% and 62% more expensive in the last year, they can still be found offers at 2.90% at a term of 25 years, which is the one that adapts to the average period for which mortgage loans are requested in Spain.

Another asset in its favor is that the cost of changing the rate of a mortgage from variable to fixed -through subrogation or novation- has been reduced in the banks that have taken advantage of the aid plan for those with mortgages. In those cases, during 2023 entities they will not be able to charge a commission for subrogation/novation and, from 2024, this charge will be limited to 0.05%.

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Another measure is to change variable to mixed mortgage in those cases in which the mortgaged party can repay the debt early, since the mixed ones allow access to a more advantageous fixed interest rate than that of the fixed ones.

“There are mixed mortgages with an interest from the 2,25%”, says Estefanía González, although this would only be applied for a few years. “The more there are, the higher the fixed rate applied by the bank will be and after this first stage, the mortgage would once again be variable and, therefore, the user would be exposed to the fluctuations of the Euribor,” explains the expert.

Another formula to avoid the comeback of the Euribor is pay off early part of the mortgage to reduce the monthly installment. Of course, this is an option that can only be executed by those who have savings. In these cases, the amount to be amortized is deducted from the capital pending payment.

It should also be taken into account that there are banks that they charge commissions by early amortization, but these are limited by law: in variable mortgages the amount is one 0,25% for the first three years, and nothing from the fourth (or 0.15% for five years and nothing from the sixth), and in fixed mortgages, a 2% during the first 10 years and 1.5% from the eleventh.

However, “banks that have decided to take advantage of the mortgage aid plan will not be able to charge anything for this concept during 2023 to those who have a variable mortgage,” recalls González.

Those with mortgages can take advantage of government aid, but only those who meet certain requirements of income and have subscribed their mortgage with a bank that has decided to adhere to this aid.

These include measures such as extending the term of mortgages until seven years to reduce the fee, ask for a grace period from up to five years in which only interest is paid or, even, request that it be freeze the payment of the mortgage installment for 12 months. These alternatives they don’t come free. According to Kelisto’s calculations, the expenses derived from these operations increase the final cost of the mortgage between a 16% and 72%depending on the option chosen.

Other options are to request an extension of the mortgage term through a novationo negotiate a deficiencyalternatives that analysts do not recommend, since “both procedures have costs and, in the long run, make more expensive the amount that will end up being paid in interest”, warns González.

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