The Euribor, which is the reference index for variable-rate mortgages, resumed at the beginning of the month daily rate increases and it approached the level of 3% interest that had not been seen in fourteen years. It should be noted that it is not going down, but it has not risen to the levels of two big bull runs of 2022. The markets await with interest the effects, as of today, of the withdrawal of almost 300,000 million euros of liquidity in the hands of the banks and how they will react to the new rate-adjusted remuneration. Given this situation of uncertainty, many users have doubts about what will happen to their mortgages.
In this fifth edition of the iAhorro y La Información digital office, held live this Wednesday, November 23 on the platform’s YouTube channel and on the main La Información social networks, the experts answered the main questions from readers. During this talk they shed light on the advantages of mixed mortgages, an alternative to the fixed and variable ones in the face of the Euribor situation. They also addressed the keys to access the new mortgage aid dthe government and what is the best option in case you want to change your mortgage. In addition, they also addressed other questions about the evolution of the Euribor, whether it is more convenient to cancel or subrogate the mortgage and what future mortgagees who want to buy a house in the short or medium term should take into account.
Check below the answers from iAhorro experts, Pilar Arribasmortgage adviser on the online platform, and Francis Santos, iAhorro mortgage analyst. In the coming months, La Información will continue collaborating with iAhorro to inform readers in other clinics about current economic issues. If you have questions about savings or mortgages, you can send your questions through the email address [email protected], on any of the iAhorro or La Información social networks with the hashtag #HipotecasiAhorroLI.
1. Advantages of mixed mortgages
What advantages does the mixed mortgage provide compared to other types of mortgages?
ANSWER FROM FRANCISCO SANTOS (IAHORRO) | The most important thing is to know that the mixed mortgage has a fixed period and a variable one, due to this, it has generally been a third option for users. Today, at an economic level, it can be an interesting product, especially depending on the phase in which the client is. The clearest example is those people who took advantage of the fixed part in the period of 2008, one of the toughest in the history of this country, and who have been more than 10 years enjoying the Euribor in negative. Now it happens in a similar way, because with the Euribor, as it is, taking out a 5-year mortgage and waiting for it to stabilize can be difficult. So really afterward, if it starts to slow down, it can be a more profitable trade.
2. Fixed or mixed mortgage?
If a person is debating between a fixed and a mixed mortgage right now, which one should they choose?
ANSWER FROM FRANCISCO SANTOS (IAHORRO) | First of all compare, you have to look at both the period and the years of amortization, the TIN, the APR, the type of differential that will be applied to you or even the penalty for amortization. Taking a 15-year fixed interest rate mortgage is not the same as a 15-year mixed mortgage plus 10 variables. The most important thing is not to stop comparing the fixed with the mixed. It must be borne in mind that in Spain most mortgages are requested for 30 years, but in more than 80% of cases they are repaid before 20, either by extra payments or bonuses. Who has not heard that if we win the lottery the first thing we would do is pay off the mortgage?
3. Change the contract with a mixed mortgage
In the event that a person has signed a mixed mortgage… What can you do when you reach the variable tranche? Is it better to continue with that mortgage or change to a more favorable one?
ANSWER FROM PILAR ARRIBAS (IAHORRO) | It will depend on the situation we are in at the time. If the Euribor has stabilized and it has even gone down, you will be able to continue without problems with the mixed mortgage in that period of the variable rate and see how it evolves with that product. On the other hand, if it continues to shoot, you will have to assess options. In case you want to change it to another bank, you will have to take advantage of the available offers and order a wide variety of them to be able to compare the options or conditions established.
4. How much savings does the mixed mortgage provide?
How much savings can a person buy a fixed mortgage instead of a mixed one?
ANSWER FROM PILAR ARRIBAS (IAHORRO) | It will not only depend on the type, but also on the conditions offered by the bank, so we cannot give a clear forecast of savings. In addition, it will also depend on the Euribor that is at that time. When we are in a mortgage search process it is very important to have all the information to be able to compare and choose the best option for us. It will also be important to look at the TIN, the TAE and take into account the links requested by the bank.
5. Keys to government mortgage aid
Who can benefit from the new government measures on mortgages for vulnerable families?
ANSWER FROM IAHORRO | The Government approved in the Council of Ministers on November 22 a series of measures to alleviate the mortgage costs of vulnerable families. There are three types of vulnerable profiles that could benefit from this aid:
- These measures will be eligible for ‘vulnerable mortgage debtors’, that is, those households whose income is less than 25,200 euros per year (three times the IPREM), who dedicate more than 50% of their monthly salary to paying the mortgage and who have seen how their monthly installment to pay for the loan has also risen by 50% (for example, those who go from paying 300 euros to 450).
- The second type are homes whose income is less than 25,200 euros per year and who dedicate more than 50% of their monthly salary to pay the mortgage, but who do not meet the current criteria of a 50% increase in the mortgage effort may also benefit from the Code of Good Practices with a two year grace perioda lower interest rate during the grace period and an extension of the term of up to seven years.
- And lastly, the third type is the one they have called ‘middle class at risk of vulnerability‘, that is, those households whose income is less than 29,400 euros per year (3.5 times the IPREM). These could avail themselves of “the possibility of freeze for 12 months of the quotaa lower interest rate on the deferred principal and an extension of the loan term of up to 7 years”, they affirm from the Executive.
The main measure is a grace periodwhich means that for five years, since the mortgage is made up of interest and principal, the user would only pay the interest and not the principal. Will this grace period pay off with these government measures? During these five years of grace, the capital will not disappear but will accumulate, so that when the sixth year arrives, the user will return to the current Euribor and continue paying the mortgage. Therefore, if we look at the entire life of the mortgage, interest will increase because it will be recalculated on that capital. With a mortgage of 150,000 euros, the increase will be approximately 5,000 euros more.