The Code of Good Practice approved by the Government to facilitate the transition from variable to fixed or mixed mortgages, eliminating the commissions that had to pay the mortgages, expires on 31 December 2024. We are therefore faced with the last opportunity to change the variable mortgage without pay commissions
“The Euribor is clearly declining and we do not believe that the Executive will further extend this measure, so this is the best time to change your mortgage; It’s an almost free process”, says Simone Colombelli, mortgage director of the comparator and mortgage consultant iAhorro.
mortgage modifications
The transition from a variable mortgage to a fixed or mixed mortgage, whether through subrogation or by canceling and opening a new mortgage, will no longer be free from 1 January 2025. Everything seems to indicate that the Government central will not further extend the Code of Good Practices approved at the end of 2022 and which was strictly respected by the banks during the years 2023 and 2024. The objective was to facilitate the change of mortgage for all those citizens who saw how the mortgage installments its variable loans increased due to the rise in Euribor. But now the trend of this indicator is clearly downward.
Switching from a variable mortgage to a fixed or mixed mortgage, whether through subrogation or through cancellation and opening of a new mortgage, will no longer be free from 1 January 2025.
Specifically, the reference index with which the interest that holders of variable rate mortgages will pay for their loans to the bank is calculated recorded its maximum value in recent years in October 2023 (4.160%), but just a year later, in October 2024, it was reduced to 2.691%, a value lower by almost one and a half points. Therefore, those with an adjustable rate mortgage are already seeing rather significant reductions in their monthly payments, although it is true that they do not yet offset the increases experienced between 2022 and 2023.
“Euribor is clearly in a phase of decline and we do not believe that Pedro Sánchez’s government will further extend this measure; It has already been in force for two years. It’s true that in 2023, at that time, we didn’t know whether or not it would be extended until 2024 and in the end it was, but the situation at that time was much worse than it is now.
“The Euribor is in a clear phase of decline and we do not believe that Pedro Sánchez’s executive will further extend this measure”, underline from iahorro.
So it’s likely that it won’t last much longer,” predicts Simone Colombelli. And he adds that “those who are in doubt about whether or not to change their variable mortgage should know that this is the best time because it is a process that will be practically free; With subrogation you would only have to pay for the house appraisal (around 400 euros).”
what lowers the Euribor
The most used reference index in mortgages drops by 26 thousandths to 2.502%
As regards the monthly average of the Euribor for November 2024, this remains momentarily at 2,581%, which will mean a small drop compared to the month of October (which closed at 2,691%) but a more than interesting cut for those who review annually (in November 2023 was at 4.022%).
By how much will the monthly mortgage payments be reduced?
With a provisional average Euribor of 2.581%, a 150,000 euro mortgage with a duration of 25 years with a spread of 1% and semi-annual review, will go from the payment of 974.15 euros to the payment of 88.47 euros, which represents a monthly variation 91.7 euros less. If the review is annual, you will go from paying 1,003.81 euros to paying 882.47 euros, which represents a monthly variation of 121.3 euros less.
With a provisional average Euribor of 2.581%, a 150,000 euro mortgage with a duration of 25 years with a 1% spread and semi-annual review will go from paying 974.15 euros to paying 88.47 euros
At the last monetary policy meeting, held on September 12, the ECB decided to lower interest rates. The next meeting of the European Central Bank will be held on December 18 in Frankfurt and, depending on the current economic data (mainly inflation and growth in the eurozone) rates could be lowered again.
Interview between Time.news Editor and Simone Colombelli, Mortgage Director at iAhorro
Editor: Welcome, Simone Colombelli! Thank you for joining us today. With the deadline for the Government’s Code of Good Practice approaching, many homeowners are feeling anxious about their variable mortgages. Can you explain what this Code entails and its significance for homeowners?
Simone Colombelli: Thank you for having me! The Code of Good Practice, which was introduced by the Government, was designed to help homeowners transition from variable rate mortgages to fixed or mixed mortgages without incurring hefty fees. Essentially, it allowed borrowers to switch to a more stable mortgage type, particularly as they faced rising Euribor rates in recent years. However, this measure is set to expire on December 31, 2024, which means homeowners really need to act soon if they want to avoid those commissions.
Editor: That’s critical information. Many people with variable rate mortgages have been feeling the pressure as the Euribor rates fluctuate. You mentioned it’s currently in a declining phase. Can you shed some light on this trend and how it affects mortgage payments?
Simone Colombelli: Absolutely. The Euribor peaked at 4.160% in October 2023, but by October 2024, it had already dropped to 2.691%. This decline is significant because it means that homeowners with variable mortgages are starting to see reductions in their monthly payments. That said, it’s important to note that these savings haven’t fully compensated for the steep increases many faced between 2022 and 2023.
Editor: So, for those considering a change, why is now the optimal time to make that move?
Simone Colombelli: Now is the best time because, not only is the process of switching to a fixed or mixed mortgage practically free until the end of 2024, but the decline in Euribor means that many people can lock in lower rates. After January 1, 2025, we can expect to see additional costs associated with making that transition. With subrogation, for example, the only expense would typically be the cost of a house appraisal, which is around 400 euros.
Editor: That’s useful to know! However, some homeowners might still be hesitant about making such a significant financial decision. What advice do you have for individuals sitting on the fence?
Simone Colombelli: I would say it’s crucial to consider your current financial situation and projections regarding interest rates. The general consensus is that the current government won’t further extend the Code of Good Practice, and so this window of opportunity is closing. Making the switch now aligns with a downward trend in Euribor rates; it’s a nearly cost-free process and could save a lot over time.
Editor: What are the broader implications of these trends on the mortgage market, both for lenders and borrowers?
Simone Colombelli: For lenders, it’s a chance to attract customers looking for more stability as they navigate the turbulent interest rate landscape. For borrowers, it’s a critical moment to reassess their mortgage strategy. Those who don’t act before the code expires might find themselves at a disadvantage, facing not only potential increases in their monthly payments but also additional costs to switch to a more favorable mortgage structure.
Editor: Thank you for this insightful discussion, Simone. It sounds like there is urgency for homeowners to evaluate their mortgage options. Any final thoughts?
Simone Colombelli: Yes, I encourage every homeowner with a variable mortgage to take a close look at their options now. Time is of the essence, and with the Euribor trending downward, it really is a favorable moment to lock in a more stable mortgage. Don’t wait until it’s too late!
Editor: Wise advice! Thank you, Simone, for your expertise and insights today. We appreciate your time.
Simone Colombelli: Thank you for having me! It was a pleasure discussing this important topic.
