The rise in interest rates as a result of the change in monetary policy of the European Central Bank (ECB) has led to a paradigm shift in the mortgage market. And it is not for less, because since last July 2022, the ECB has come to raise the price of money up to five times its value.
Despite the fact that the objective was to curb inflation and bring it as close as possible to 2%, the result has been that rates have ended up approaching, during the month of February, their highest level recorded since November 2008. This situation, has generated a series of significant changes in the socioeconomic sphere of many Spanish families which, consequently, has also affected the sale of homes.
Current situation of mortgages in Spain
In the field of mortgages, taking into account that the majority in Spain is referenced to a variable typeit is estimated that they will soon approach 4% during the month of February, so the quotas will continue to rise, a trend that could be foreseen at the end of 2022.
With this situation on the table, one of the operations to avoid the rise of the Euribor is to contract a fixed rate mortgage, which currently have also raised their prices. This has caused them to begin to lose popularity among home buyers in the last year.
How will the rise in fixed mortgages affect you if you are a seller?
If what you are looking for is to sell your home in 2023, the direct consequence will be the drop in demand by buyers for new mortgages for home purchases. The European Central Bank (ECB) has surveyed households in the euro zone to determine that the last quarter of 2022 registered the greatest pessimism on the part of consumers in the real estate market. Above all, the decline in demand was particularly in Germany and France.
Thus, it is not strange to think that the situation coincides with what the ECB forecasts for the first quarter of 2023, which will be a clear decrease in the volume of transactions.
However, in the realm of mortgages, it is forecast that mixed mortgagess will gain popularity for the development of the year. Taking the context into account, it can become an interesting alternative modality in the event that the buying client wants their installments to not depend so much on the fluctuations of the Euribor.
Because? Because it would allow buyers to pay stable installments during the first five, ten and fifteen years with a lower fixed rate than today’s mortgages. However, after the end of this first period, the interest would become variable until maturity. In this way, to avoid being exposed to the Euribor for a longer time, they would have to assess advancing the debt.
In any case, it should not be overlooked that, in the current context of the financial markets, it is clear that the real estate market will be a good refuge for investing and saving.
How to improve a mortgage
With this change in interest rates, the trend in the mortgage field is changing. More and more mortgaged people are wondering how much they can save if they decide to change their mortgage, especially those who currently have a variable mortgage and fear possible increases in the Euribor.
To get more favorable conditions, mortgagees have different options at their disposal:
- Novation: agree to a lower interest rate with the bank itself.
- Subrogation: Transfer the mortgage to another financial entity.
- Cancellation: cancel the current mortgage and hire another with improved conditions.
Due to the current trend of rising interest rates, any change to the current mortgage requires an in-depth study of the different options
*Remember that with our Mortgage Calculator you can get an idea of the monthly mortgage payment that you will have to face depending on the value of the home you want to access.