He decline in the Euribor has picked up speed and anticipates that 2025 will be another year of good news for mortgage holders. The indicator opened the current year at 3.679% and is on track to close to 2.4% after having experienced its largest year-on-year decline in no less than 15 years thanks to the successive rate cuts of the European Central Bank (ECB). The market assumes that the organization led by Christine Lagarde will deepen the adjustment, favoring, by implication, an additional reduction in the cost of mortgage loans, although the bulk of the reductions are already behind us. According to analysts Bloombergwill lower the price of money from the current 3% to 2.01% at the end of next year, at which time the Euribor will find a floor at 2.07% that will remain almost unchanged for a long time.
We will not return to the idyllic scenario for those mortgaged with 0% rates, but that potential 50 basis point cut will once again translate into savings in the amortization installments of your loans. In an average mortgage it will mean a relief close to 39.16 euros per month or 469.92 euros per year. The calculation is made on the average loan estimated by the National Institute of Statistics (INE) of 150,528 euros last September, with a 25-year contract term and taking as a basis a differential of 0.75 points above the Euribor to set the price. The starting point is the Euribor price in November (2.506%) and the 2% reference predicted by the market to simulate projections.
The magnitude of the reduction The amortization rate will be different depending on factors such as the amount owed, the period pending repayment of the loan and when it was signed, since in the first years a higher percentage of repayment of interest and less of the principal owed is attended to.
The savings on the monthly bill would thus range, for example, between 3.41% on a loan with a 15-year remaining payment life (288.24 euros per year would be saved for every 100,000 euros pending repayment to the bank); 5.33% if said term amounts to 25 years (312.12 euros under the same assumption) or 6.19% if the financing reaches 30 years (323.76 euros).
Regardless of the impact, the reality is that there is still room to reduce the mortgage bill, although the strong resurgence that demand is experiencing affects the commercial dispute and limits that part of the reduction that occurs in prices due to mere rivalry. between financial entities to attract business.
Dispute over VIP operations
“Really There is a war for clients with a personal banking and private banking profile. For the mid-lower mid profile, there is less pressure now to improve offerings. The reason is that the reduction in the Euribor in this last quarter has greatly increased the demand for mortgages and entities have to fight less to meet their budgets,” explains Santiago Cruz, mortgage consultant and CEO of Ibercredit.
“In the last month there has been little movement – changes in prices,” corroborates Laura Martínez, spokesperson for iAhorro. “Where we do expect movement is in January. As the ECB lowered rates on December 12 and January 30 is the next meeting, surely at the end of January there will be some adjustment in product again, especially by the largest banks. We talk about CaixaBank, we talk about Kutxabank, Laboral Kutxa, maybe BBVA will also probably go down a little… Evo is also now having some quite interesting mortgages,” he points out.
“What can we expect for 2025? If the forecasts regarding the rate cut are met, between now and June 2025 we could see reductions of between 5% and 10% on mortgageswith special emphasis on fixed and mixed mortgages“, estimates Estefanía González, spokesperson for Kelisto.es. This expert specifies, in any case, that with the beginning of the new year the “closure effect” or the pressure of covering the budgeted business objectives is lost and “the movements will depend much more, in principle, on the evolution of rates”.
Trump and the war in Ukraine
“We believe that the logical thing would be to see the deposit rate around 2-2.25% for the second half of next year,” he points out, with the caveat that the degree of aggressiveness in the ECB’s movements will depend on exogenous factors. such as “the measures taken by the Trump cabinet starting in January, the path taken by the FED, the situation in the Middle East, the war in Ukraine…”. “Any negative change in course would directly affect costs, especially energy costs, and therefore inflation, and all of this would be reflected in the measures taken by the ECB,” he summarizes.
“The forecast is that banking will continue to be aggressive in 2025,” predicts Miquel Riera, mortgage specialist at HelpMyCash.com. Among the entities that have improved their offers with greater intensity in the last year, he points out that the list “is long: Openbank, ING, Banco Sabadell, Banco Santander, CaixaBank, Unicaja, Abanca, EVO Banco, BBVA or Cajamar, among many others” . All experts agree on the importance of always negotiating with several financial entities to be “more likely to obtain better conditions”, being able to achieve reductions in TIN interest of up to one percentage point in the most disputed customer profiles.
Negotiating is key
“According to our data, the average interest of Fixed rate mortgage offers have gone from 3.40% at the beginning of the year to 2.80% currently. And some banks even offer rates of around 2.50% or less,” adds Riera.
The expectation of falling rates that has dominated throughout this year after the Euribor began to fall after setting its ceiling at 4.160% in October 2023 has translated into numerous changes in trends in the market. An example is that mixed loans have taken center stageto the detriment of the fixed and, above all, the variable, which dominated hiring in Spain for decades.
“Nothing in a variable mortgage. There is almost no supply, there is almost no demand. Neither users want them nor are banks offering them. Almost everyone is pushing more now for the mixed mortgage and we see that, probably in 2025, there will still be a surprise and the fixed mortgage will be the surprise and it will once again be the most in-demand mortgage,” predicts the iAhorro spokesperson.
The contracting of loans with “armored” installments throughout their validity or, at least, in the first ten years represented 61.5% of new contracts last August, while the variable modality barely reaches 9.5% of the signed contracts, according to the latest bulletin published by the Spanish Mortgage Association (AHE). In 2017, before the financial crisis broke out, its importance was the opposite: with 26.6% of operations as fixed and 42.5% as variable, while at the height of the real estate boom, the latter modality almost monopolized contracting.
The change in trend in monetary policy also “has stopped mortgage changes in their tracks” because the numbers do not come out well despite the fact that the Government eliminated the commissions for the conversion of a variable loan to a fixed or mixed one with the intention of helping clients face the rate scenario, explains the CEO of Ibercredit.
“There are more expenses beyond the cancellation commission,” he indicates, referring to charges assumed by the client such as the cancellation of registration or products such as insurance on the original loan and the appraisal. “In the end, u“A change of entity means a minimum of 2,000 euros between all concepts”, a charge that the client thinks about a lot now in the expectation that their mortgage payment will become cheaper on its own with the change in monetary policy.
The number of loans with changes in their conditions registered in property records decreased by 1.9% in October passed in annual rate, up to 11,850, and 95.3% of the cases occurred to establish changes in interest rates, according to data from the National Institute of Statistics (INE). It increased by 13.9% in novations (changes within the bank itself) and decreased by 38.9% in transfers to another entity or subrogations. This “theft” of clients, with their mortgages, reached maximum intensity at the start of the year, before the ECB intensified its downward movements.
With the tightening of monetary policy, the request for financing sank and renegotiations were triggered to alleviate the financial burden – the ECB had raised the rate from 0% to 4.5% in just over two years. The subsequent reduction encourages demand that remained stagnant and this year the concession grows at a rate of 13%. The bank’s expectation is that its pace will be maintained or even increased next year because a part of the population could be waiting for more favorable financial conditions to decide to buy a home.
Another factor likely to contribute to hiring is the implementation of ICO guarantees to facilitate access to housing for young people up to 35 years old and the increase in the price of housing, which requires requesting higher amounts.
Longer period to lower the amortization fee
The rise in rates pushed households to sit down with their banks to modify the conditions of their loans or look for better offers in other entities to reduce amortization fees. A common solution is to change the type of mortgage – from variable to fixed or mixed – but also to increase the repayment period to reduce the bill by repaying it in a greater number of installments. The average contracting term has risen to 25 years from the 23 set in 2020. Another resource has been accelerated repayment. According to the AHE, the volume of amortizations grew from 57 billion euros between June 2021 and June 2020 to 72 billion twelve months later, while much of the new demand disappeared.
LinkedinBeloud
#average #mortgage #cheaper #euros #ECBs #rate #decrease
