The year of the highest mortgage prices in history | Economy

It had been years since the Euribor had won so many stocks. The blame lies with this indicator, the most used in its 12-month reference to calculate the price of variable mortgages in Spain, which led to the sharpest increase in its 23-year history since last January. And also the third (for now) longest. As a result, millions of borrowers last December saw their loan balances soar to levels that seemed impossible. Then, the Euribor reached its all-time low below half a negative point. This December it closed above 3%, a barrier that was overcome this Thursday for the first time since 2008. The monthly average remains definitively at 3.018% and the escalation does not stop: the mortgages that are reviewed with reference to the last month of the year will become 44.5% more expensive. For an average mortgage (137,921 euros in 2021, to be paid over 24 years, according to the INE) that contains a differential of one point, which translates into a payment of 226 euros more per month or 2,715 euros more per year .

The Euribor rose in every month of 2022. And two moments have inflamed its evolution: the war in Ukraine and the first increases in the official rates of the European Central Bank (ECB). With the former, what until then appeared to be a slight increase in price gained momentum. The war conflict aggravated the general increase in prices, starting with that of energy. “The idea throughout this year is that inflation is here to stay for a while,” summarizes Hugo Rodríguez, a researcher at the Institute of Economic Analysis of the CSIC. Consequently, the European-type interbank offer (from whose English name derives the acronym euribor) started to grow because it expresses the interest in which a group of banks lend money to each other. Discounting these entities that monetary policy would have to change, which would make the official price of money more expensive, they logically increased the 12-month loans.

The second act of the drama began in July. That month the ECB’s policy change came true. The euro regulator raised official rates for the first time in six years. Plus, it was the biggest raise (half a point) since the year 2000. And he didn’t stop there: he announced it wouldn’t be his last move and he more than complied. In total, 2022 saw four hikes by the ECB, two by half a point and two by 0.75 points. The latest, announced in the middle of the same month, left the official price of money at 2.5%. That’s a lot if you compare it to 0% six months ago, but it’s still far from the crossroads between 4.25% and 4.5% that the Federal Reserve manages across the Atlantic, more early and bolder in its hikes of rates.

The objective of all this monetary policy is to contain prices (maintaining inflation at 2% in the medium term is the main mandate of the ECB) even at the cost of curbing consumption. And one of the inevitable side effects is the rising cost of loans. This was progressive. Taking the average mortgage for 2021 as a reference, those who have recalculated the loans with the reference for January, February or March have hardly noticed: the monthly increase has not even reached 15 euros. But in April that figure had almost doubled and in the summer it was already around 100 euros. September, when the second of four official rate hikes took place, saw the most pronounced monthly increase in the Euribor in its entire history: almost one point in 30 days. And in the final part of the year, when the rate of increase slowed down, but the differential with last year continued to widen (because rates fell then and now they rise), variable mortgages ended up increasing by more than 40%. expensive and above 200 euros per month. Since September, each month has seen the largest year-on-year increase in the indicator’s history: Up until this year, it was just over two points; in December it is already at 3.5.

It is a serious blow to many household economies, also affected by the general increase in prices and the loss of purchasing power. “It affects millions of people who have seen or will see how their mortgage increases a lot,” underlines Carlos Martín, head of the economic cabinet of CC OO. In Spain there are about 3.7 million variable mortgages and the union calculates that borrowers, with inflation and expected wage increases, risk “a loss of purchasing power of 16%” in 2023.

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That of the Euribor was the chronicle of an announced hike. And it has caused profound changes in the mortgage market. Even long before the war in Ukraine, when the pandemic forced the period of extraordinarily low rates to be extended, there were rumors that the time of cheap loans was drawing to a close. Symbolically, the first month in which the INE registered more fixed mortgages in Spain (marginal 10 years ago) than variable ones was March 2020. Now, when the prophecy of rising interest rates has more than come true, the former account for seven out of ten operations.

And this was also the year of subrogations and novations: thousands of mortgages seeking to convert their mortgages into fixed ones or to improve their conditions. But since October, variable mortgages have recovered, which Martín attributes to the “withdrawal of basic financial services or basic mortgage loans by entities”. That is, banks see too much risk or too little business in fixed interest and price it unattractive to consumers.

Some will be able to benefit from the old or new code of practice that the government and the bank have accepted. These will offer better-than-market conditions to vulnerable borrowers. But consumer associations are wondering about the real scope of a measure which, according to calculations by the Executive, is aimed at one million families. Where there is least hesitation is what can be expected for 2023. Rodríguez, of the CSIC, recalls that “the ECB has said very clearly that it will make further rate hikes, and the Euribor is incorporating this expectation”. Since “indicators say inflation will continue well into 2024,” he adds, “the indicator should continue to rise.” According to Bankinter’s latest estimate, it will rise to 4% next year. Other analyst houses have not yet advanced their predictions. After all, a year ago it seemed like science fiction to place the Euribor at 1% for this December. And it’s already at 3%.