2023-11-04 05:47:21
He euribor has captured all eyes for almost two years. The index to which most mortgages in Spain are referenced has gone from being negative to moving slightly above 4% and the blow to family finances is being notable. This impact can be seen in the quota, but it will be much more noticeable in the long term. Assuming a stable Euribor, an average mortgage would now bear total interest on the borrowed capital of 76%, when two years ago that percentage was only 6.5%.
The average mortgage in Spain It is 150,000 euros, with a term of 25 years and an interest rate of Euribor plus a differential of 1%. This reference has not changed much in recent years. However, the panorama has changed a lot when it comes to the mortgage index.
The Euribor entered negative territory for the first time in 2016. And it has remained in the red until a year and a half ago, even reaching a rate of -0.5%. That was considered by the financial sector as an anomaly but was derived from the zero or negative official rates of the European Central Bank (ECB).
With these levels, getting a variable rate mortgage – and also a fixed rate since rates lower than 1% were even offered – was an opportunity for households. An average mortgage with the Euribor from two years ago had a payment of 532.85 euros per month. Thinking more long-term, and assuming that the Euribor remains stable, the total interest that the client would have to pay with the index at those levels did not reach 9,860 euros over the entire life of the loan. This amount would represent 6.57% of the requested capital, with which the user would pay the bank a total of 159,856.39 euros after 25 years.
Now, the situation has taken a radical turn. The mortgage index has climbed to over 4% and with this data the ‘price’ to pay for a loan has skyrocketed. Taking as a reference that the Euribor remains stable, an average mortgage as the index currently stands would have a fee of 878.63 euros, which is 346 euros more per month that two years ago.
Average mortgage before
Total interest payable: 9,856.39 euros
An average loan two years ago of 150,000 euros, for 25 years and with an interest of Euribor + 1%. Simulation assuming that the Euribor remains stable.
Average mortgage now
Total interest payable: 113,591 euros
An average loan two years ago of 150,000 euros, for 25 years and with an interest of Euribor + 1%. Simulation assuming that the Euribor remains stable.
In the long term, in that same case the total interest to be paid on the loan would multiply by eleven to 113,591 euros after the 25-year term. This amount would be equivalent to paying almost 76% interest in relation to the capital that has been requested. In this sense, the client would have paid the bank a total of 263,591 euros at the end of the life of the loan.
The rise in the Euribor is behind this dynamic, which shows how the fastest rise in the history of the mortgage index impacts family finances. Thus, it is the fastest rise in the historical series, although it is currently showing signs of stagnation.
The evolution of the Euribor
The Euribor ended 2021 at historic lows of -0.5% and began the rise in 2022. It was not until April of last year when it came back negative for the first time in six years. There the escalation was already unstoppable, registering a growth of one percentage point in the month of September alone. And all this derived from the ECB’s rate increases, which sets the price of money.
With the arrival of 2023, the first voices began to sound that the ECB could soon stop raising rates, something that happened a few weeks ago at 4.5%. Even so, the Euribor was already discounting a break from the first quarter of the year and there it began to moderate the rise. In fact, if it continues the same in November, it would accumulate half a year installed around 4-4.1%.
Likewise, in the financial sector they take it for granted that the Euribor will remain at these high values in the short and also in the medium term, as long as the ECB does not decide to lower rates, a possibility that is now not even on the horizon. In this way, the bank points out that consumers also have to get used to the fact that the ‘price’ of credits will no longer be the same as before and that getting a mortgage is going to be increasingly more expensive.
This is the new normal of mortgages, whose increase in cost brings with it a cooling of the credit market since the more expensive it is, the fewer loans are requested and the banks apply greater caution. Something that is already being noticed in the figures as well.
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