The 12-month Euribor There is hardly any respite in the escalation that began in February when the European Central Bank (ECB) opened the door to a rise in interest rates that is expected to be carried out at the end of this year. The index that serves as a reference for calculating the majority of variable mortgages in Spain places the provisional rate for March at -0.3% compared to -0.487% just a year ago. If the month ends like this, this increase will have an impact on the loans that are subject to review, which will become more expensive on average by around 150 euros per year.
Specifically, for a average mortgage of 150,000 euros for a term of 25 years with a spread of 1% on the Euribor, the monthly installment will go from 532.8 euros to 545.17 euros, which means 12.37 euros more per month and 148.44 euros more per year.
Throughout this week, the daily price of the 12-month Euribor has fluctuated between -0.258% and -0.207%. At the beginning of February it marked -0.431% and after the ECB meeting in which the discourse regarding inflation changed, it began to drop to -0.28%. When Russia’s invasion of Ukraine began, it rebounded to -0.39%, but after the last ECB appointment in early March it has resumed its decline. The market seems to anticipate that the monetary authority will raise rates in the last quarter of 2022 and the Euribor is already discounting it.
“Although the Euribor will remain below zero until the moment of the first rate hike approaches, it is expected that this year it will suffer greater volatility, and the expectation is that it will continue to appreciate throughout the year. Despite the fact that during In 2021, 60.3% of the mortgages that were signed were at a fixed rate, more than 75% of the total loans continue to be at a variable rate, so the rise in the Euribor will cause an increase in the share of the largest part of the loans”, indicates Joaquín Robles, an analyst at XTB.
The change in trend of the Euribor, which just three months ago continued to fall and hovered around -0.5%, not only affects the mortgages under review, but also the new mortgages that are contracted, since the mortgage offer of the banking has made a 180 degree turn. Several banks have already raised the prices of fixed mortgages and lowered those of variable mortgages to take advantage of the rise in the mortgage rate and adapt to the current scenario.
From HelpMyCash they maintain that “in the face of these changes, the client may think that a variable mortgage is better for him, since his interest is currently lower than that of a fixed one. However, he must be aware that if the Euribor continues to rise, Your mortgage rate will also go up, so you could end up paying more money than if you had gone with a fixed rate.
In fact, in the hypothetical case that the Euribor climbs to zero this year, the monthly letter would go from 532.8 to 565.31 euros, so that it would increase by 32.51 euros per month or 390.12 euros per year.
According to HelpMyCash, “contracting a fixed mortgage can be a good option for those who do not want to risk paying more due to a rise in the Euribor. On the other hand, contracting a variable mortgage can be convenient for those who want to pay little during the first years and believe that the Euribor will not rise much more”.
Keys to improve mortgage conditions
From the Trioteca digital platform, they highlight the keys to succeed in the case of wanting to change the mortgage and get better conditions, thus contributing to family savings.
There are three options to improve mortgages. LSubrogation represents improving the conditions of the mortgage loan through a change of bank. The cancellation and formalization of a new mortgage consists of annulling the current mortgage and requesting a new mortgage loan from another bank. And the novation means renegotiating the loan with the bank with which the mortgage was initially contracted, without changing the bank.
“Lowering the interest rate, modifying the repayment term, reducing commissions, eliminating abusive clauses and cutting or improving links or products associated with the mortgage are some of the reasons to change the mortgage,” says Trioteca, who believes that it is a good time to change the mortgage from variable interest to fixed.
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