2023-05-31 13:20:21
There is no truce for the mortgaged. The Euribor says goodbye to May at 3.862% from 3.757% the previous month and very far from the 0.287% at which the indicator was quoted a year ago.
Although the rate of monthly increase has moderated compared to previous months, there are already four consecutive ones above 3.5%, dangerously queuing with that 4% barrier that nobody wants to see arrive. In fact, in daily rate the indicator stood this Wednesday at 3.939%.
As a result of this increase, mortgagees whose contract is reviewed in the coming weeks will pay almost 300 euros more per month on average. According to estimates from the financial comparator Helpmycash, for an average variable mortgage with an outstanding amount of 150,000 euros, a term of 25 years and an interest rate of Euribor plus 1%, the fee will rise from 585 euros to almost 865 euros per month. That is, 280 euros more per month (about 3,356 euros year-year).
That is if the loan is reviewed annually with the value of May. If the review is semi-annual, the monthly payment would go from about 778 euros to almost 865 euros; about 87 euros more per month (about 522 euros more per semester).
It must be taken into account, of course, that this rebound in installments will depend on other types of loan conditions, such as its amount or the pending term, as well as the differential (which is added to the Euribor to calculate the interest).
This increase in cost has contributed to disrupting the budget of families in this cycle marked by high inflation, causing an explosive cocktail for the real estate market in which households have stopped demand for credit and banks have stopped granting it, being much more demanding with the requirements to grant a loan for the purchase of housing.
In fact, according to the latest data from the INE, the number of mortgages to buy a home contracted by 15.7% in March compared to the same month of the previous year, the biggest drop since January 2021. In this line, the capital lent by banks also fell by 17% in the period analyzed.
The cycle of rising interest rates has also had a notable influence on this evolution, with increasingly more expensive loans in the heat of this rise in the Euribor. What’s more, the average starting interest rate on mortgages to buy a home in March reached 2.99%. It is the highest rate in almost six years, since April 2017. And if before it was usual to find fixed-rate mortgages well below 2%, now the average rate on this type of loan is already 3.15%, the highest since April 2018. And at a variable rate it amounts to 2.72%.
Estefanía González, from the comparator Kelisto.es, explains that, in the new mortgage offer, “a never-before-seen dance of offers is being observed and that it goes in two directions. According to the data handled by the firm, »variable mortgages have become cheaper by 30.9% in the last year, while fixed ones have become more expensive between 108% and 121%, depending on the term«.
“In this context, we have noticed a change in consumer attitude: not only is he more aware of the dangers that the Euribor entails, but those who want to buy -demand, even if it cannot materialize later, continues to be high, among other reasons because access to housing via rental also continues to be very stressed- they adjust their accounts a lot. The consumer is aware of the extra cost that he will have to face in terms of interest and is looking for more affordable homes than before, “says González.
The problem is that it doesn’t look like this is going to end the May rally. “We believe that the ECB will raise rates again in June because it still has to achieve its objective: to get inflation in the euro zone to 5.5% in 2023 and 2% in 2024,” says Olivia Feldman, co-founder by Helpmycash. “In addition, summer is just around the corner and we all know that it has always been a season of high consumption, so curbing spending is essential to control inflation,” the experts at Helpmycash.com add.
Their estimates suggest that the ECB will raise interest rates to 4% at its next meeting on June 15, so the Euribor will close the second quarter of the year with an average value of around 4.25%.
You have to go back to November 2008, at the height of the financial crisis, to see a similar level. Specifically, 4.35%. The historical maximum of the Euribor was a few months before, in July of that year, when the indicator touched 5.393%.
Negotiate with the bank
Against this background, the variable mortgages that are reviewed in the coming months will become significantly more expensive, which can cause financial problems for the holders of these products (especially those households with greater economic vulnerability).
According to HelpMyCash mortgage specialist, Miquel Riera, “those who have problems making ends meet should make an appointment with their bank as soon as possible to study possible solutions.”
In general, entities are open to restructuring the debt of their clients if they ask for help before a default occurs: they offer the option of extending the term to reduce the monthly payment, applying a grace period during which they only pay interest over time, etc.
In addition, if the holder of the variable mortgage meets certain requirements, they will be able to take advantage of the current Code of Good Banking Practices, which is a package of measures that allows them to restructure the debt of clients in a situation of economic vulnerability by extending their term, reducing your interest and the application of a deficiency.
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