The Euribor, the most widely used indicator for calculating mortgage loans at a variable rate in Spain, closed on Friday at 1.483%. Its highest daily level since March 2012 and, with this rise, the index registers a provisional monthly average of 1.18% and indicates that August will close with an average higher than 1.2%. This escalation will mean a monthly increase of 130 euros in September in the average mortgages of 150,000 euros at 25 years, that is, an annual increase of 1,560 euros.
“Surely we will close August breaking the 1% barrier. It is being discounted that next month there will be a new rise of 0.5 points because there is a very clear consensus that inflation is not being controlled despite this drop in oil prices,” says Antonio Gallardo, head of Studies of the Association of Financial Users (Asufin).
This rise in the Euribor, which heats up again after learning that inflation has picked up again in the eurozone to a record level of 8.9%, already adds an average level so far in August that is close to 1.1% and “The most widely agreed forecasts indicate that we are going to close next year with a Euribor between 2% and 2.5%”, explained Gallardo. Bankinter’s forecasts also predict a close of 2.2% next year. Therefore, it is expected to have a significant impact on variable mortgages.
variable loans
This type of loan raises or lowers the amount of the monthly installments based on a reference index (normally the Euribor). According to the latest report from the Spanish Mortgage Association (AHE), at the end of 2021, Spain had 5.5 million live mortgages and three quarters (4.1 million) had variable interest. It is estimated that around 90% of variable loans are linked to the 12-month Euribor. This means that odds are periodically recalculated based on how the index has changed since the last revision.
House price: 1,894 euros
The square meter. The rise in mortgages is also compounded by the increase in housing prices. The average price of housing in the State rose by 7.4% at the end of the second quarter of 2022 compared to the data from a year earlier, to stand at 1,894 euros per square meter, according to a report by the College of Registrars.
By autonomous communities, the most expensive housing prices were found in the Balearic Islands, where the square meter was paid at 3,180 euros, followed by 3,169 euros per square meter in the Community of Madrid, 2,787 euros per square meter in the CAV, and the 2,427 euros per square meter of Catalonia.
The most accessible regions to buy a home were Extremadura, with 796 euros per square meter, and Castilla-La Mancha, at 830 euros per square meter.
According to Asufin calculations, for an average mortgage of 150,000 euros over 25 years, which has to be reviewed next September and with a differential of Euribor plus 1%, the rise would amount to 130 euros per month, which represents an increase annual of 1,560 euros. And if the amount of the mortgage loan amounts to 300,000 euros, with the same term and interest rate conditions, the increase in the monthly installment will be 222.31 euros, so it will go from paying 896.52 per month to 1,118 .83 euros. In this case, the annual increase would be 2,667.72 euros, according to the iAhorro portal.
Fewer concessions
Gallardo also considers that in the coming months real estate prices will tend to moderate and that the granting of new mortgages will decrease, although without major falls.
The rise in mortgages accelerated notably in July when the rise in the Euribor began. That month, the average rate at which Spanish entities granted loans stood at 1.986%, the highest percentage since June 2019. And everything points, of course, to the fact that August will bring another new upturn. A year ago, the average rate was 1.485%.
This upward trend in the Euribor has led financial institutions to modify their strategy to make their fixed-rate loans less attractive, making their interest more expensive, with the aim of diverting new clients to variable mortgages.
Thus, the new loans are more expensive, but those already mortgaged are not going to get rid of this rise either. In fact, those who faced the annual review of their mortgage in July have already seen their monthly payment increase significantly.
And this increase in the cost of the mortgage is added to the price of electricity and the price of the shopping basket and drowns again families who are already facing inflation above 10%.