Inflation settles in Europe around double digits, 10.4% in Spain and 9.1% in the countries of the single currency, and unfolds a whole series of evils on the economy, with that gift of ubiquity that allows you to damage your pocket at the supermarket, when putting on the washing machine or stopping to fill up the car tank on vacation. The last open front affects housing. The fight to contain prices is pushing central banks to raise interest rates faster and more aggressively than the market expected, and this is transferred to variable mortgages, the one that more than four million Spaniards have: the The Euribor closed August at an average of 1.249 percentage points, its highest level in a decade, above 0.992 in July, and made mortgages more expensive at its highest year-on-year rate since 2000.
The differential thus hits an important jump. In August 2022 the Euribor is 1,747 points more expensive than in August 2021, and that will cause a rise in fees. For an average mortgage of 150,000 euros, with a maturity of 25 years and a rate of Euribor plus one point, the update would mean having to pay a letter of 122 euros more per month or, what is the same, 1,464 euros more per year. In other words, if until now a loan of this type had an approximate fee of 532 euros, now it would cost about 654 euros, according to the calculator of the Spanish Mortgage Association.
The recent intervention of the president of the Federal Reserve, Jerome Powell, in the symposium of central banks held in Jackson Hole (Wyoming), in which he spoke of the obligation to inflict “some pain” on families and companies to contain inflation, They have been the last incentive for the rise in the Euribor, which is already discounting the possibility of interest rate increases of 75 basis points by the European Central Bank at its September meeting.
For José García Montalvo, Professor of Economics at Pompeu Fabra University, the idea of sacrifice enunciated by Powell has already caught on among investors. “The markets have decided that rates are going to go up and they are going to go up fast, so they are readjusting expectations. We have somewhat recovered the trend that we had until June in the Euribor, which had softened in July”.
The trajectory of recent months is that of an upward curve for the index to which variable mortgages are referenced. After more than six years in negative territory due to economic stimuli from the European Central Bank (ECB), in mid-April the daily value of the Euribor already turned positive. This is how it has remained since then: it accumulates five months in positive and eight months of consecutive promotions. This Wednesday, the 12-month Euribor marks 1.778%, above 1.758% on Tuesday.
The change from variable to fixed
With experts announcing new increases, the fear of more expensive installments is pushing many Spanish households to choose the fixed over the variable in their new purchases. According to the National Institute of Statistics, in June, 73% of mortgages were fixed-rate and 27% variable, with an average interest rate of 2.06% for the former and 2.64% for the latter. For those who already had it, the step with which part of the mortgaged have tried to protect their savings has been to change from a variable mortgage to a fixed one.
García Montalvo warns that financial institutions are making fixed prices more expensive, so no one is spared from the extra costs. “People run away from the variable, but there is not much escape: one gets you or the other gets you. In the end, for some it is a psychological issue, of sleeping peacefully at night knowing that what they pay is not going to change”. Despite the greater complications to pay that the increase in installments can entail on paper, the idea that mortgage delinquency is a problem is not considered probable right now. “The most important thing in delinquency is the loss of employment. It is what goes to the vein of delinquency. As long as I have a salary, people are paying.”