- Euribor. Why do fixed-rate mortgages gain ground?
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The entry into force of the new Real Estate Credit Law and, above all, the mortgage war that the banks have maintained for months to attract clients is redefining the mortgage market in Spain and it is already noted. Just take a look at the data published yesterday by the National Institute of Statistics (INE) that include, among other things, an increase in the changes in the nature of mortgages or subrogations to the creditor - that is, customers jump more than one bank to another attracted by more advantageous conditions - while the commitment to fixed-rate loans grows, which remain at record lows.
And both are related. The banks have been engaged in voracious competition for months to offer the most attractive mortgages for clients. In the current scenario of very low rates and with the Euribor breaking negative records almost every month, entities have found in mortgages at a fixed rate a product that allows them to capture consumers and obtain more profitability than the loans at variable rates . That is why their battle focuses, above all, on fixed rate mortgages.
The movement has several derivatives: there are more and more mortgages at a fixed rate , their prices remain around minimums they have never been before and clients are less and less hesitant to move from one entity to another if they offer better conditions.
With data: 43.7% of housing loans granted in July had a fixed interest rate, compared to 56.3% that the variables represented, according to the INE Mortgage statistics.
As for the price , the average interest rate is 2.56% (1% lower than July 2018) and the average term of 24 years. At the beginning, the rate is 2.28% for mortgages on variable-rate housing (with a decrease of 3.4%) and 3.01% for fixed-rate mortgages (only 0.2% higher).
"The public institute shows the clear commitment of banks and users for fixed-rate mortgages and a reduction in those of variable rate, which is likely to be reinforced in future statistics by the recent falls of the Euribor," says Fernando Encinar , head of studies of the Idealista real estate portal.
Less loyal customers
Regarding the mobility of customers, the figures indicate that the entity changes grew by 12.3% in the seventh month of the year, as well as the mortgages in which the owner of the mortgaged property changes ( subrogations to the debtor ), which increased by 21.6%. Part of this mobility is explained by the entry into force of the new mortgage law, which includes among its innovations facilitating changes in the conditions of the contracted mortgages.
The law aims to facilitate such modifications, whether the debtor wants to change from one entity to another or if he wants to negotiate new loan characteristics with his own bank. This last point, however, is not yet reflected in the market. Mortgages with changes in their conditions reached 5,505 in July, 0.4% less in year-on-year comparison and, within them, 40.3% modified interest rates. In addition, the novations (modifications produced with the same financial entity) fell 4.2%, to 4,251.
For Beatriz Toribio , director of Fotocasa Studies, "the statistics still do not fully reflect the effect of the new mortgage law, which entered into force in mid-June and delayed the closing of sale and purchase transactions and the signing of mortgages."
Despite this, it is observed that the housing market "tends towards stabilization and hence these oscillations occur in the statistics that measure its activity. Mortgage financing continues to consolidate in our country because there is liquidity in the market. But since that started the 2019 statistics of the INE reflects annual increases and decreases that indicate a normalization in the granting of mortgages ".
Ferran Font, director of studies at Pisos.com, agrees to rule out the current "irregularity" of the market. "To this condition we must add the impact that both the elections called in November and the United Kingdom's exit from the European Union may have," he says.
Precisely after the downturn in June, the mortgage concession rebounded 13.1% in July, to 33,344, although the average amount contracted 2.5%, to 121,414 euros.
From the Spanish Banking Association (AEB), they highlight that "the adaptation to the norm has been able to explain the recent instability of the mortgage formalization data", although they trust that the new law "increases market security and stability, and help reduce existing litigation, "in the words of its spokesman, José Luis Martínez Campuzano.
Regarding the geographical distribution of loans, the communities with the highest number of mortgages constituted on dwellings in July were Andalusia (6,786), Catalonia (5,468) and Madrid (5,130).
On the other hand, the highest annual variation rates were in Extremadura (+ 45.9%), Castilla-La Mancha (+ 38.5%) and Castilla y León (+ 33.9%), compared to the largest decreases , which were registered in Navarra (-10.7%), Madrid (-7.2%) and La Rioja (-4.9%).
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