The current context of uncertainty, inflation, war and slowdown in economic growth has forced the mortgage market to change its strategy. The Euribor, the index in which most Spanish mortgages are referenced, closed February at -0.335% compared to -0.502% at the end of 2021, according to the Bank of Spain. So far in March, this marker has already risen in value by nearly 50%.
This abrupt change in scenario and the forecast of a possible rate hike by the European Central Bank (ECB) has led many entities in the last two months to make fixed-rate mortgages more expensive and encourage variable-rate ones.
The former allowed banks to shield themselves from a long period of negative interest rates. However, with the current context, the variables mean higher income for them, according to experts. “If the bank establishes a variable loan at 1.2% interest rate and the Euribor rises to 2% over time, the bank will add the differential to its income,” explains the director of mortgages at iAhorro, Simone Colombelli.
BBVA and Bankinter were the first to take that direction last February announcing their new mortgage conditions. In the case of Bankinter, for example, it has passed in the variables linked to a nominal interest rate (TIN) of 1.99% to 1.25% during the first year and, for the rest of the term of the loan, it passes from Euribor+0.99% to +0.85%. On the other hand, the entity led by Maria Dolores Dancausa, has increased the prices of subsidized fixed mortgages between 15 and 20 basic points depending on the time period chosen, up to 1.65% at 30 years, according to sources from the entity. Numerous banks have followed this trend, such as Banco Santander or Banc Sabadell, while others, such as CaixaBank, have not yet changed their offer while waiting to see the evolution of the Euribor.
Before this trend advances on the part of the entities, economists encourage users to take advantage of the “historically low” price of fixed-rate mortgages when contracting a loan and even assess a change from a variable. They remember that, in this way, they will eliminate risks when increases in interest rates are expected. “The last train of interesting fixed mortgages is passing by. Now is the time to switch from a variable mortgage to a fixed one to take advantage of its low and competitive rates”, which could result in monthly savings of around 100 euros, according to the CEO of Triotheque, Ricardo Garriga.
Despite the fact that a few years ago making changes to mortgage credit was a complicated or almost impossible procedure to carry out, with the 2019 real estate contract credit law, aspects were introduced that “encourage and facilitate” them, according to what is indicated. Leyre Lopez, analyst of the Spanish Mortgage Association (AHE). Users should know that they have three main options: make a subrogation to improve the conditions of the loan by changing banks; perform a cancellation and formalization of a new mortgage in another entity; and novation, renegotiating the loan with the initial bank.
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Those who decide to take the step should look at how much money they still have to pay, the market offer, the bonuses linked to the mortgage or the penalty for the cancellation of the previous bank, he adds garrigue.
All the forecasts have changed but, how far is left for the Euribor to rise? While waiting for the ECB’s decisions, “it is clear that by the end of the year, if not before, the Euribor will be positive and within a year it will be close to 1%,” says the deputy director general of the Union of Mortgage Credits (UCI ), Jose Manuel Fernandez. And he adds that it is not expected that there will be a very sharp rise in the long term. CaixaBank Research forecasts in its March report that the series of six consecutive years in negative rates will be broken with 0.13% at the end of 2022. At the end of 2023, it estimates that the Euribor will climb to 0.85%.