In the medium term is virtue. Or what, transferred to the current vibrant mortgage offer, mixed mortgages could be the best option to hedge against rate hikes. Part is at fixed interest, generally for the first ten years, and part, until the repayment of the loan, at a variable rate. The mixed mortgage would be allowing to find an intermediate point, and attractive for price, in full rising wave of the rates.
Banks update the conditions of their mortgage loans almost every week and, in this constant review, the interest on fixed mortgages is beginning to be higher than that which can be found in the fixed tranche of mixed mortgages. This product had been completely cornered in the banking showcase, but the unstoppable pull of the Euribor has placed them at the forefront of the sample book of an increasingly abundant group of financial entities.
The great aspiration of those who are going to take out a mortgage now is to sign a fixed-rate one with which to shield themselves from the rises in official rates that are to come and that are going to continue to boost the Euribor, albeit with less intensity than seen to date. now. However, there are hardly any offers left with a fixed interest rate of less than 3%.
BBVA, Evo Banco and Ibercaja are still resisting with a price slightly below the 3% APR threshold. But in mixed mortgages, cheaper interest is common, even less than 2% nominal for the first ten years of the life of the loan. A key difference, since it is in those first years when the interest burden paid by the client on the amount loaned by the bank is greater.
In the variable part there are spreads from Euribor plus 0.55%
Simone Colombelli, director of mortgages at the comparator and mortgage advisor iAhorro, affirms that “the interest rate of the mixed mortgage is between 0.3 and 0.6 percentage points below the nominal of a fixed one and, with these data, it is clear which is much better for the user to sign a mixed one”.
In Openbank, one of the entities where the mixed mortgage shares a showcase with the fixed and the variable, the interest of the fixed part of the mixed credit is 2.37% nominal, for a term of 10 years, while in its offer to fixed rate rises slightly to 2.69%. As for the variable part of the mixed, it is Euribor plus 0.55%, while the interest on the one hundred percent variable mortgage is Euribor plus 0.7%.
The most reliable comparison is the one measured in APR terms, with all the loan expenses included. And, in that case, and for a mortgage of 150,000 euros over 25 years, the APR of Openbank’s variable mortgage is 3.56%; 3.32% in fixed and 3.21% in mixed, according to the entity’s website. The prices are the subsidized ones, those that result from accepting conditions such as payroll direct debit, home and life insurance and contracting the gas and electricity supply with Repsol.
At ING they acknowledge that they are betting on mixed mortgages, which represent 60% of their new production, compared to 25% of the variables and 15% of the fixed ones. “Mixed mortgages now offer the best option, they are a winning horse,” says Alberto Gómez Agustino, director of mortgages at ING. The entity is offering a fixed nominal rate of 3.45% for the first ten years and, subsequently, a variable interest rate of Euribor plus 0.79%. And it offers the longest repayment term among mixed mortgages, up to 40 years.
Evo Banco and Ibercaja, which compete hard in price in fixed mortgages, also join the offer of mixed mortgages with one of the lowest rates in the market. Evo Banco establishes a fixed nominal rate for the first five years of 1.85% and, later, a variable rate of Euribor plus 0.75%. Direct debit of payroll and contracting of life and home insurance is required. Without this link, the bonuses disappear and the nominal fixed rate rises to 2.15% and the variable rate rises to Euribor plus 1.15%.
60% of ING’s new mortgage production is at a mixed interest rate
In Ibercaja, the mixed mortgage has a fixed interest of 1.85% in the first ten years and a variable part of Euribor plus 1% the rest of the years. They are subsidized types, which go through contracting home and life insurance and also through the systematic contribution of 75 euros per month to an investment fund of the entity.
As explained by Víctor Royo, head of commercial strategy at Ibercaja, the mixed mortgage “can guarantee a very attractive fixed rate for 5 or 10 years, and later switch to a variable rate with the expectation of greater stability in interest rates and coinciding normally with a positive evolution of wages”. The most demanded option is being the term of 10 years of the fixed rate period, according to him. Thus, the client manages to ensure a rate without variations in the years in which the interest burden of the loan weighs most. Ibercaja and Evo also offer a fixed part in their mixed loans for only five years, almost comparable to a variable-rate mortgage.
“If after time the client is not satisfied with the interest rate of his mixed mortgage, there is always the option of subrogation”, they point out from iAhorro. From this mortgage consultant they also point out that although the fixed interest part may now be especially attractive, the total cost of the credit may well become more expensive when the rate becomes variable.
Mixed mortgages have not yet penetrated the banking system as a whole, which reduces price competition. CaixaBank, leader in the mortgage market, does not offer them and maintains its commitment to the fixed rate. Santander has indeed incorporated the mixed ones into its offer, although at higher rates: a nominal fixed rate of 4.3% in the first years and Euribor plus 0.8% from the tenth year.
The Euribor points to 3% at the end of the year
Meteoric rise. The rise in interest rates by the ECB has caused a meteoric rise in the 12-month Euribor, to which the vast majority of variable-rate mortgages refer, and is causing an unprecedented rise in monthly installments upon review annual. The monthly average of the Euribor was already close to 2.8% in November, compared to -0.487% in the same month last year.
Forecast. Expert estimates suggest that the Euribor will reach 3% at the end of the year. Its rise will lose intensity compared to what has been seen so far, but the rate hike that the ECB is expected to decide on in December still needs to be accommodated and that could be another half point. The perspective is of more increases in 2023, already a quarter of a point, and of an environment of high rates for longer, which distances the reduction in short-term mortgage payments.
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