The arreón of the Euribor, which has shot up 3.52 points in the last year, has increased the bill of those mortgaged at a variable rate who, basically, pay more interest on the debt contracted with the bank because the cost of financing is older. The installments with review in December have become more expensive by 49% on average and the monthly amount allocated to the payment of interest has multiplied by eight.
The Euribor determines the interest of some four million variable mortgages in Spain. The indicator closed 2022 with a rate of 3.018% compared to the negative value of -0.502% a year earlier. For a recent type loan –signed, for example, two years ago– of 150,000 euros for 25 years with a differential of 1%, this means an increase in the monthly bill of 262 euros, going from 531 euros to 793 euros. A part of that amount is dedicated to the amortization of the capital and another to the payment of interest. Although before the review, only about 57 euros of interest were being paid, with the new installment that amount rises to 470 euros, 720% more.
The reference index closed 2022 at 3.018% compared to -0.502% a year earlier
It must be taken into account that the impact of the Euribor is not the same in all mortgages, but rather affects the less old ones to a greater extent. This is so because in Spain the French amortization system governs, according to which at the beginning more interest is paid than capital and interest is reduced as time goes by. Thus, if the mortgage loan had been formalized in 2010, the monthly interest would go from about 30 euros to about 290 euros. In the case of having carried out the operation in 2000, the interest would remain at 57 euros compared to the previous five euros.
The Euribor continues to be conditioned by high inflation and the prospect of further rate hikes by the European Central Bank (ECB). “The next data will be decisive. The market expects inflation to moderate, which could lead to a change in trend. We have already known the preliminary CPI data for Spain in December (5.8% compared to the previous 6.8%), which could indicate that the maximum rates in prices have already reached their ceiling. Even so, it is well above the 2% medium-term objective, which will continue to pressure the ECB to raise rates,” says Darío García, an analyst at XTB.
The ECB has already warned that it will continue to raise rates to try to contain inflation. More increases of 50 basis points are expected in the next monetary policy meetings. “Despite the fact that inflation seems to be easing from its cycle highs, the variable remains and in recent days several members of the ECB have expressed their support for further significant rate hikes,” says Juan José Fernández-Figares, Director of Research at Link Securities.
“The only scenario in which the escalation of mortgage payments could be contained would be one in which price pressure is reduced. Something, in the short term, only viable with a twist in the conflict in Ukraine that relaxes the tensions in the energy market”, they maintain in the Negotiating Agency, where they comment that, although the mortgaged ones are the most affected by the escalation of rates and the Euribor, “banks will see substantial improvements in their income statements, after several years with small margins due to low interest rates.” Of course, the entities face a probable increase in delinquency due to the difficulties of families to face the sharp increases in their mortgage payments.
Most experts forecast a Euribor between 3.5% and 4% throughout 2023
Expert forecasts suggest that the Euribor, already at 3.3%, will continue to rise in the coming months, but less intensely than in 2022. Most analysts forecast that the index will be between 3.5 % and 4% in 2023. Some believe that it will stabilize around 3% or even slow down. “An effective fight against inflation will generate, in the long term, a drop in the Euribor,” says the head of Hipoo’s mortgage analysis, Rafael Moral, who hopes that 2023 “will not be a year with strong rises in the Euribor.” According to the fintech’s calculations, the index will reach peaks close to 3.5% and, starting in the third quarter, it will slow down and even fall to 2.5%. From the Trioteca platform they estimate that “it will stabilize around 3% and 4% throughout the year.”
Increase in surrogacy
Change. From the Trioteca platform they believe that 2023 will be marked by an increase in subrogations –change the bank mortgage–. They calculate that 29% of the mortgages signed in 2022 were subrogations. These types of operations, which seek to improve the conditions of the loan, will exceed, they say, 50% in 2023.
Offer. Banks continue to make fixed rates more expensive, which exceed 3% APR, and lower the price of variables. The CEO of TRIOTECA, Ricard Garriga, anticipates an “overwhelming price competitiveness in the offer of variable mortgages, at rates between 0.5% and 0.8% plus Euribor”.
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