Although the Euribor only applies to loans contracted at a variable rate, it also has a direct influence on fixed-rate mortgages.
In just eight months, the Euribor has gone from being -0.5% in December to standing at 1.25% in August. A very rapid increase that will not foreseeably stop in September, with the announcement of a new rise in rates in between. In fact, in the first week of the month the average is 1.88%, a value that does not bode well for those who have to update their mortgage payment in the coming months, but neither for those who want to take out a loan at fixed rate or change the conditions of the one they already have through a novation.
Because, although the Euribor only applies to loans contracted at a variable rate, it also has a direct influence on fixed-rate mortgages; when it rises, the banks are interested in attracting more customers to the variable rate, so they lower the spreads to improve their sales in this modality while they make the fixed rate more expensive or, simply, stop offering it. So, as the entities adjust their offer, there will be more cases in which, even with the increase in the fee in the next revision, the variable that they have will still be more competitive than the fixed ones that they will offer us.
In fact, it is no longer possible to find a fixed-rate mortgage below 2% APR when not so long ago they even looked at 1.5%. Currently, according to the mortgage comparator HelpMyCash.com, we can still hire them without a discount at 2.71% APR, but there are also entities that have already raised them to 3.69%. With a bonus, that is, contracting services other than the mortgage, the range oscillates between 2.17% and 2.91%.
Faced with this increase in prices, some experts assure that whoever wants to switch to the fixed rate must process the change before the end of the year, a date on which they believe that it could reach 5%, depending on how both the types and the euribor. For its part, the OCU has proposed three possible scenarios to guide what would happen, depending on the evolution of the reference index, with a mortgage of 100,000 euros with a term of 15 years.
-A fixed-rate mortgage would be the best alternative if the Euribor rose to 1.5% in 2023 and then stabilized around 2% during the rest of the life of the loan.
-If there were rapid increases in the Euribor to tackle inflation (reaching 2.5% in 2023), and between 2024 and 2028 there was a second phase of progressive cuts to try to tackle the possible slowdown in European economies and avoid recession followed by a few years of stability with a progressive rise to around 2%, we would find ourselves in a situation in which there are hardly any differences between the fixed and the variable loan.
-On the other hand, if the Euribor rose quickly, reaching 2.5% in 2023 and then falling again (to a minimum of 0.5% in 2026, 2027 and 2028), «which would not be unusual if you want to tackle a possible slowdown in European economies’, a variable rate mortgage would be the best option.
In any case, it should be remembered that, although the variable rate gives us an unpleasant rise in the monthly fee at the next review, switching to a fixed rate is not advisable for everyone. To know if it pays us to make any change, we have to look at the rate at which we have it contracted but also the time that we have left on the mortgage. The amortization system that is usually used places the interest in the installments of the first years, so that it is not the same if we have fifteen or twenty left than if there are only five, because in the final stretch it is probably not worth facing the procedures neither of the novation nor of the subrogation.
In addition, before making any decision, whether to switch to a fixed rate or to contract a better variable rate than the one we have, it is essential to compare offers (and ask them to give them to us in writing) without forgetting the ‘online’ entities and those that have less presence in our environment (which can offer better conditions to gain market share) and, above all, look very carefully at what expenses the change causes, especially if by doing so we hire new services to obtain supposed bonuses in the new conditions of the mortgage.