BarcelonaRisk premiums are history. The ominous indicators par excellence of this price crisis are inflation data and the daily evolution of the ten-year Euribor, which is known on weekdays at 11.00 a.m. and which families and companies they have used to consult almost daily.
If they do, it’s because this indicator has soared to unprecedented levels in just a few months. The Euribor (the indicator to which the vast majority of variable mortgages are referenced) closed last year in the negative, at the level of -0.501%. After climbing month-on-month throughout the year, it hit 2.625% last week. The increase in these nine months has been six times the levels of 2021.
And this means that as soon as the loan update is applied to the families, they will suffer a sharp price increase. As an indicator: In a mortgage of 200,000 euros requested for 30 years, each point of rise in the Euribor makes the monthly receipt more expensive by 100 euros. If the Euribor is now at 2.4%, a family that is updated now would see how the mortgage becomes more expensive by 240 euros.
Type variable or fix
This only affects families who have a variable rate mortgage and those who took out a fixed rate are freed. The bad news is that although in the last year there are already a majority of those who do it at a fixed rate to dribble the Euribor, variable mortgages continue to be an overwhelming majority in Spain.
At the end of 2021 there were 5.5 million mortgages in Spain in total, of which 4.1 million (75%) were variable interest. Thus, 4.1 million families are experiencing the evolution of the last few months with concern because it already affects them or will affect their pockets.
These families (companies and self-employed people with variable-rate debts are also in the same situation) have found themselves in a rather intractable maze since the start of the Euribor rise: when have they gone to the financial institutions to renegotiate the mortgage and ask for a fixed rate, they have found that the institution offers them fixed rates, but much higher than the current Euribor, in an offer that not only does not solve their problem, but even makes it more expensive As an example: in July, when Euribor did not reach 1%, they offered a fixed rate of 2.5%. And right now, when the average Euribor is 2.45%, they offer a fixed rate that in some cases reaches 4% or 5%.
The solution, the professionals
The situation is apparently a dead end maze, but in fact there is one to find a fixed rate mortgage at favorable terms. The brokers they do not negotiate with bank branches, but with central offices, and operate with all entities.
They are the ones who can even now get good offers, which will depend on canceling the previous mortgage early (with a cost that, depending on what you have signed, can be around figures of between 1,000 and 1,500 euros, on average) and make a new one. Fixed or, perhaps, mixed. “This modality allows you to have five or ten years at a fixed rate and then switch to a variable rate; it is interesting because it is flexible and reduces your uncertainty in the coming years”, explains Ricard Garriga, CEO of the fintech Trioteca.
The figure of brokers it has an added benefit, which is that in some cases it is the banks who pay for the service for having brought them new customers. When they do charge, and depending on the treatment and service, they can charge between 1,000 and 8,000 euros for a mortgage change.
Insurance and other associated products
Experts also remember that one thing to always check is the price of products associated with the mortgage, such as life or home insurance, often with more expensive terms than in the industry and which should be asked to review annually .
Another important question when thinking about what to do with the variable mortgage is what will happen next year with interest rates and Euribor. There is some consensus that it won’t go down before the middle of next year. As a reference, Ricard Garriga recalls that the negative Euribor that has existed in recent years has been a historical anomaly, and that the maximum levels during this time have been above 5.5%. The average in these last two decades has been around 2%.
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