2023-06-25 07:37:07
The level of demagogy that can be reached by the policy involved in being a financial adviser in mortgage matters is striking. As striking as the ups and downs that its financing has suffered in the last 10 years.
Now, in the midst of escalating interest rates from central banks, the main indicator for setting the price of mortgages in Spain, the euríbor, it’s shot and after remaining for almost a decade in the environment of 0% on average. Only in 2022 was the change radical, it went from being almost 0.5% negative in the month of January to 3% in December. That is, it was multiplied by 6. So far in 2023, this indicator is already close to 4%.
That is, we are facing a vertical rise in the indicator. If it behaves as it has in the past, these vertical rises top out and start to fall and keep rates extraordinarily high, well above their average, for two to three years.
If we look at what has happened in banking in recent years at the same time, it is also striking. On the one hand, the practical disappearance for years of fixed-rate mortgages from the offers of financial institutions. Hiring him was residual, almost a statistical error, with variable-rate mortgages being the real protagonists. At most, in 2013 or 2014 mixed alternatives could be found, with a few years at a fixed rate and then the variable rate with attractive differentials was imposed.
Far, far away are the times when financial institutions allowed customers benefit from lower variable rates with clauses that prevent families from having to assume extraordinary increases in the indicator. Those famous ceiling clauses that guaranteed mortgagees not to pay more than an agreed limit in the event that the Euribor began to escalate, and the entity allowed it to guarantee a minimum return by establishing a floor clause. This, which now perhaps many variable-rate mortgagees who are experiencing chilling increases in their mortgage payments, would see very favorably, was considered a scandal in the past that cost financial institutions a lot of money. Million-dollar lawsuits in which the Justice forced the bank to return a good part of the money collected in those floor clauses to the clients.
Well, already then we said that this judicial populism would bring consequences. Here we have them. The ceiling and floor clauses disappeared. There are no limits either above or below, whether the Euribor goes above 5% or goes down again to negative ground.
The unfair help that Yolanda Díaz wants to give
While Sánchez goes through the televisions and makes jokes with Wyoming, the new white lady of social communism in Spain, Yolanda Diaz, keep dropping occurrences to see if someone buys them. The last one, after going so far as to propose that he would give all Spaniards 20,000 euros of inheritance, has been to make a deposit of 1,000 euros in the account of those mortgaged at a variable rate, as a gesture of help to allow them to cushion the very expensive revisions that they are experiencing in their quotas.
The great absurdity of Yolanda’s measure
But it is that no matter how hard the rise in the mortgage payments of so many families is, what is striking is that he wants to use public money extracted through taxes on the productive class, also to those to whom he now wants to give it, to ease the burden on families that, on the one hand, have already benefited for more than a few months from extraordinarily low interest rates and, therefore, from much lower installments than those who decided to take a fixed-rate mortgage, and that they have had the same opportunity as anyone to change their mortgage to a fixed rate when the bells of inflation were already ringing.
But how much have these families been able to save?
Pulling from the newspaper library and statistics, we observe that the fixed rates in the commercialization of mortgage loans were almost not offered in 2013 or 2014. The effective average rates in 2013 that were paid for a mortgage were 3.32% and the differentials over the Euribor were 2.78% on average.
A year later in 2014, the Euribor fell to 0.32% and the differential did so to 2.13%, the effective rate at that time being 2.45%. The fixed rate was not generalized until 2015, when the Euribor was already close to 0% with 0.059% and the differential was up to 1.72%. That year, the average effective rate paid for a variable rate mortgage was 1.77% compared to the first fixed-rate mortgages that had been on the market for a long time of 2.7%.
10,256 euros of savings in just 6 years
For that year 2015, who hires a Mortgage of 200,000 euros at a fixed rate with a rate of 2.7% and at 30 yearswould be paying 811 euros as a fee, compared to the one who took out a mortgage from floating rate (1.77%), who paid 716.4 euros per month for the same credit, which would mean about 94.75 euros per month. For 12 months, 1,129 euros less than the one that was mortgaged that year at a fixed rate.
The revision of the second year, with the Euribor at -0.08%, would have given an effective rate of 1.64. In the review, they would have lowered the installment at 703 euroswhich would have meant a saving with respect to the fixed-rate mortgage of 107.44 euros, in the 12 months of that 2016, 1,289 euros.
Let’s see the review of the third year, with the Euribor at -0.19%, it would pay an effective rate of 1.53%, which lowers the fee to 693,12 and the difference in the monthly installment with the fixed rate mortgage is 118 euros, in 12 months, 1416 euros. In just three years, they would have benefited from a difference of 3,834 euros less in mortgage payment than what the person who decided to take advantage of the fixed-rate mortgage paid.
And so we could continue until we reach 2021, when the cumulative savings in this simulation reaches 10,256 euros.
In other words, someone who took out a variable-rate mortgage in 2015 with the standard differential of that year and reviewed their mortgage in December each year, in 2021 he had paid 10,256 euros less than the fixed-rate mortgage.
That same client in 2022 he would have seen his fee go from the 663 euros he paid in 2021 to 1040 euros229.69 euros more than its fixed mortgage competitor that continues to pay 811 euros. In 2022 it will pay 2,756 euros more than the fixed-rate mortgage, which means that it still has an advantage of 7,500 euros.
What is Yolanda Díaz saying then? Well, that mortgaged person, who still maintains a balance in favor with respect to the mortgaged person at a fixed rate of 7,500 euros, We are going to give you a grant of 1,000 euros to face the mortgage payment. And we are going to give it to them because those 1,000 euros come out of the pocket of all Spaniards.
Perhaps the possibility that Yolanda Díaz is unaware of this point, or that she directly does not know how mortgage prices are formed in Spain, should not be underestimated, but these calculations are easy to do, and show a reality, which in addition to being an exercise populist, based on extracting more income from the already greatly squeezed productive class, would be profoundly unfair.
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