The Euribor becomes more expensive: is it time to go to the fixed rate?
The forecasts have been fulfilled, and the Euribor, an index that is taken as a reference for the price of variable mortgages, has ended August shot up to 1.249% in its monthly average, compared to 0.992% in July, which means registering its highest level since May 2012 (then it stood at 1.266%). This is confirmed by the Bank of Spain. This rebound also means a rise of 1.747 points compared to a year ago, when the average was negative (in detail, -0.498%), which represents the highest recorded year-on-year increase till the date.
The new value of the Euribor will significantly increase the price of the variable mortgages that are reviewed in September, warns the financial comparator HelpMyCash.com, whose analysts calculate that they will rise, on average, more than 100 euros per month. Furthermore, everything indicates that this index will continue to rise in the coming months due to the policy of the European Central Bank (ECB), which will continue to increase the price of these products. For this reason, “this is a good time to switch to the fixed rate and start paying a constant monthly payment that does not depend on the Euribor,” these experts advise.
You will pay this if your mortgage is reviewed in September
When a mortgage has a variable rate, its interest is calculated by adding two elements: the spread (a fixed percentage) and the reference index (usually the Euribor). Every six or 12 months, depending on what is included in the contract, the bank uses the last value registered by this index to recalculate the interest and the loan installments. Consequently, if the Euribor rises compared to its previous price, the mortgage will have a higher rate and more expensive monthly payments. That is precisely what they will happen to those mortgaged whose review takes place in Septembereither annually or semi-annually.
Several examples: a person who has a average mortgage of 150,000 euros, for a term of 25 years and with Euribor interest plus 1%. If the loan is reviewed every 12 months and the August Euribor is applied, your installments will rise 121.46 euros per month, which means paying 1,457.52 euros more per year. On the other hand, if it is reviewed every six months, the monthly installments will increase by 110.75 euros, which is 664.50 euros more per semester.
According to HelpMyCash, for the immediate future, everything indicates that the Euribor will continue to rise in the coming months due to the ECB rate hikes. According to its Analysis department, its value will be 1.90% at the end of this year and 2.20% at the end of 2023. Other analysts, such as CaixaBank Research, forecast 1.48% at the end of the year and 1. 78% in 2013.
Are you still interested in switching to a fixed mortgage?
With this upward forecast of the Euribor, it is likely that those who have contracted a variable rate mortgage will pay more expensive installments again next year, when their contract is reviewed. “There is a way to avoid it: change to a fixed interest rate. In this way, the loan will have constant installments that will not rise if the Euribor continues to shoot up. Of course, that change must be carried out as soon as possible,” They advise from HelpMyCash, since “banks are raising their fixed rates, because they prefer that their clients contract variable mortgages; that is, they hope to earn more money with these products”.
However, “there are still entities that offer competitive fixed interest of around 2%, but the longer it takes to make the change from the variable to the fixed rate, the less likely it is to get an attractive interest”, warn the analysts of this comparator of financial products.
This change can be made in three different ways, as explained on the HelpMyCash website: by means of an agreement with the bank with which the mortgage is held (novation), by transferring the loan to a different entity (creditor subrogation) or with the contracting of a new fixed mortgage to cancel the variable that is in force.