Mortgages may be closer to experiencing the change in cycle that will mean the end of negative interest rates, which have relieved families and companies. Since 2016, the Euribor, the variable interest that is applied to some loans for the purchase of a house, has been negative. In 2008 a cycle of falling interest rates had begun, with some slight rebound, which gradually lowered mortgages, after reaching maximums during the real estate boom of previous years. In the last four months, increases have been accumulating, but always below zero, until this Tuesday a positive data was registered. The Euribor has stood at 0.005% in its daily price. More than a rise it can be considered stability, but it brings closer the new stage that will lead to more expensive fees.
Experts have been warning of the change in trendalthough they don’t expect it to be rough. They are still moderate increases and they do not believe that there will be rapid increases, since the forecasts of the European Central Bank (ECB) for this year include that the Euribor ends at around 0% or 0.4%. “It is still too early to know the effects,” says Alejandro Marín, delegate of the Organization of Consumers and Users (OCU) in Zaragoza. “Although there is some forecast that indicates that we could be close to half a point at the end of the year, it is still early to know how interest rates will evolve“, he stated. He advises reviewing the conditions before contracting and “being cautious” when signing a mortgage, but he still considers that the money is “very cheap” and “it is not a burden for families”.
Who gets the mortgage
Mortgages will go up for those with a variable interest loan and are now paying lower interest than the current ones, as long as they have to review it. Banks usually include an annual update or every six months of the Euribor. Thus, if the revision is made with the last Euribor, that of the month of March, a 0.25% interest hikeplus the differential or extra interest that the bank applies and that will be negotiated at the signing of the contract.
The average amount of a mortgage is 141.427 euros, according to the latest data from the National Institute of Statistics (INE), for the month of January. Given that the average term of the loans is 24 years, the monthly installment would be 491 euros. The Euribor would be applied to this monthly payment, which in March was 0.237%, plus the agreed differential, which is usually below 1%, and the increase of 0.25% due to the rate hike.
Those who have an agreed fixed interest will not be affected by the increase in the Euribor. In this group are the buyers of recent years.
The Euribor was the most used interest rate in mortgages until the real estate crisis came and the escalation that made it reach maximums of 5% at the beginning of the real estate crisis. From there, fixed-rate contracts gained weight, which now account for 70% of the total. For mortgages constituted in January, the average interest rate at the beginning of the loan was 2.21% for variable-rate home mortgages and 2.69% for fixed-rate mortgages.
The real estate market awaits the change in trend. “The way inflation is today, plus the conflict in Ukraine, already anticipated a change in the ECB’s policy,” says Ferran Font, Director of Studies for the portal piso.com. He does not believe that the rise is still worrying, but he sees “surprising that the Euribor has been positive because four months ago it was at its historical minimum.” He agrees to be “prudent” and see how the monthly average ends up.
He acknowledges that the long period of negative rates was a “anomaly” that made it very attractive to buy and take out a fixed-rate mortgage. Now he predicts that conditions will be “less attractive” if rates rise and that banks can once again focus on offering variable rates. All in all, it maintains good forecasts in sales this year. “They are keeping up at a good pace,” despite economic uncertainty.
The era of negative rates has brought situations in which the spread has even been exceeded. Thus, from associations such as OCU they ask that in those periods the bank had “reduced the outstanding capital or paid for this capital,” says Marín. However, in practice he denounces that the entities have applied a “zero clause implicitly”. He assures that although the banks had to pay to lend money “the loans continue to be profitable”.
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