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After returning to positive territory in April 2022, the Euribor changed its trend and ended with a long period in which negative rates were established. This change of trend will not come free to the economy of families and companies, since mortgages will fluctuate upwards, with the consequent additional cost in their price.
The most encouraging forecasts are that the Euribor will close the year 2022 above 2%, although forecasts from financial analysts, national and international institutions, and specialized media indicate that it could reach up to 3%. The exact figure is still a mystery, but what is clear is that anyone who has a variable loan or tries to get a fixed mortgage today will see a substantial increase in the price of money compared to previous months.
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The Euribor will affect both fixed and variable mortgages
The rise in the Euribor in 2022 directly affects variable mortgages, that is, those whose update is linked to this bank index. Remembering a bit, we must remember that money interest rates have returned to be positive for the first time since January 2016.
Variable mortgages
The change of course in the ECB's monetary policy has affected debt yields and pushed rates upwards. This means that variable mortgages signed before the rate hike become significantly more expensive. Let's give an example. If you have a variable mortgage loan of €200,000 over 25 years with a spread of 1% over the Euribor, you will pay €120 more every month.
Fixed mortgages
In turn, another of the cases that are occurring the most since the entry into force of the largest rate hike in history is that banks are raising the prices of fixed mortgages. Lending money is no longer free. Therefore, if you are immersed in the granting of a mortgage loan, you will have seen that in recent months the “offers” of many Banks in which you found rates of 1.5% APR have disappeared.
However, unlike what happens with variable mortgages, all those whose concession was prior to the rate hike will not have an increase in their monthly amount. As a clarification, only 1 in 4 mortgages signed in Spain are agreed with a fixed interest rate.
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Now it pays to take out a fixed mortgage
Given the uncertain fluctuation in the rate hike, the best option today is that if a buyer signs a mortgage, it should be fixed. At least this is what is glimpsed for the coming years.
But, would this statement have been made just 6 months ago? Mortgages are a type of long-term real estate credit. If you have a mortgage to amortize in 30 or 40 years, it is not easy to predict what will happen with the interest rate.
What is certain is that a fixed mortgage allows a family to plan their economy since from the beginning they are clear about what they will pay monthly. However, in a rate change cycle, fixed mortgages will not be able to benefit from the decrease in the total amount paid on their mortgage.
It is possible to change from a variable mortgage to a fixed mortgage
Many of you will be wondering if a mortgage change is possible. This depends on the negotiation you enter into with your bank.
It is about making a change in the initially agreed conditions of the mortgage loan to change the interest rate from variable to fixed (or vice versa). We must warn you that these contractual novations have as a counterpart the expenses derived from it. They are not free. Banks and savings banks do not usually make it easy.
Ideally, they should be carried out when changes in trend are seen in the fluctuation of interest rates. The European Central Bank, in the voice of its President, Christine Lagarde, had been announcing the rate hike for some time. The inflation derived from the War in Ukraine has accelerated this rise and the change of cycle in interest rates.
The rise in the Euribor affects the real estate market
It is still difficult to foresee the effects that the rise in the Euribor may have on the global real estate market.
Especially if we take into account that the housing sales market has shown an upward trend in the last two years with an increase in the number of houses sold.
Despite the fact that rent has suffered a significant increase in the population centers with more young people, the purchase of housing is still the preferred option for Spaniards.
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