The Euribor is not low, it is below ground. It has closed August at -0.355%, its weakest data in history. And yet, the fixed mortgages, which are precisely those that are not governed by the future of the Euribor and therefore do not get cheaper with their debacle, are those that are breaking roofs, already reaching levels of 45.5% in Spain. How do you explain that?
Less than three years ago, 90% of the mortgages signed in our country were variable rates. Today, the fixed market is gaining ground by leaps and bounds. Only so far this year, they have gone from representing 37.2% in January to 44.5% in June, the latest available data that was released yesterday by the INE. In June 2009, just ten years ago, fixed housing mortgages represented only 3.4% of the total.
The turnaround occurred between 2015 and 2016 - it went from 6.4% of fixed mortgages to 24% - when the Spaniards began to reactivate the real estate sector, but without wanting to repeat the mistakes of a crisis that was still happening to them bill. Fixed mortgages became synonymous with security, compared to a Euribor that could turn around at any time and suffocate them again.
And so the trend has continued since then, especially considering that experts anticipated an imminent rise in interest rates by the European Central Bank (ECB). The rise has not come - and it seems that it will be delayed even more, according to the messages released by the bank supervisor that still governs Mario Draghi- and the Euribor will close August at its lowest level in history, -0.355% , after more than three years in negative territory. This historical correction - the official closing has yet to be confirmed by the Bank of Spain - is going to mean a reduction in mortgages at a variable rate that must be reviewed now. For example, for an average mortgage, of 150,000 euros at 20 years, with a Euribor + 1%, the reduction in the installment can exceed 12 euros per month.
Q&A: So, is it time for a variable or fixed mortgage?
The Euribor is still in free fall and citizens who are about to acquire a home - probably the most important financial decision of a life - will be wondering what is best for them at this time. INE figures reflect a clearly upward trend in our country towards fixed rate mortgages. But these are not going to benefit from the weakened Euribor. Is it time to look back at the variable market?
What are the advantages of a fixed rate mortgage over a variable?
The biggest advantage of fixed rate mortgages is the security of knowing how much you are going to pay each month, for the time you have signed with your bank and without surprises, whatever Euribor does. Given the negative rates of Euribor, banks have been betting for years to improve the conditions of this type of mortgage.
Can they go down even more?
Yes. Many banks have already announced reductions in their loans on their fixed-rate loans [MyInvestor (Andbank), Santander, BBVA, Bankia and Liberbank ...] but experts expect the market to be even more encouraged and Live a real mortgage battle starting this month.
But the variables are cheaper ...
Yes. The fall of the Euribor is making the mortgages under review at the moment are benefiting from significant discounts. And nobody knows how far the index can fall. In 2008 it was above 5%, yesterday closed the month at -0.335%.
So is it time to sign a variable mortgage?
For Adicae, for example, yes. The horizon of a close rate hike by the ECB has blurred and that still makes them very attractive. If you opt for a fixed one, Adicae recommends that the interest does not exceed 2%. For HelpMyCash, there is no better option than another. Of course, they recommend never allocating more than 35% of our income to pay the fee.
What is clear is that the Euribor has not yet touched down. If this trend continues, it can reach mortgages that will be signed with differentials below 0.40%. What will happen then? Will banks have to pay interest to their customers? No The new Mortgage Law, which entered into force last June, has established a floor of 0% to avoid such cases; something that seemed unthinkable only a few years ago.
A new form of calculation of the Euribor is being introduced gradually since April, which will be 100% operational in early 2020. It incorporates new calculation references so that, among other things, it is more difficult to manipulate and scandals such as the one cannot be repeated. which ended in 2013 with multimillion dollar fines by the EU to giants such as Deutsche Bank, Société Générale, Royal Bank of Scotland, JPMorgan and Citigroup.
First fall in June in six years
The entry into force of the new Mortgage Law is also having a strong impact on the behavior of the Spanish real estate sector. The INE revealed yesterday that in June, the month of its entry into force, the mortgage firm fell 2.5% in our country ; a decrease not especially significant, except when compared with the 11% that increased mortgages the previous month, but that is the first fall in a month of June in the last six years.
Specifically, 29,900 home mortgages were signed in June, 2.5% less than in the same month of the previous year. The fall has been the most pronounced of the last year in percentage, although it has been the only one that has occurred in a month of June in the last six years.
In addition to the total number of mortgages, in June the average amount of the same has also fallen (3.7% year-on-year), to 119,964 euros, and also the borrowed capital (6.1%), to close to 3,587 million of euros.
By communities, the biggest setbacks in the mortgage firm have occurred in Madrid , with 20.8% less than in the same month of the previous year, followed by La Rioja (-16.7%) and Aragón and Navarra (- 13% in both cases).
The average interest rate for home mortgage loans in June reached 2.57%, compared to 2.65% a year earlier, with an average term of 24 years.
According to the criteria of The Trust ProjectKnow more
- European Central Bank
- The Rioja
- Mario Draghi
- Deutsche Bank
- Bank of Spain
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