The government and the bank are looking for alternatives to the historic increase in monthly payments
The rise in the Euribor has restrained millions of mortgage holders who are facing the largest increase in monthly payments in history. The indicator to which most mortgages in Spain refer is already moving by 2.5% in daily rate, maximum January 2009 and places the preliminary September average at 2.13%, well above 1.25% in August and already very far from the -0.5% in which it moved just a year ago. Such a high average had not been seen since July 2011.
“Since before the summer, there has been a stream of customers coming to learn how to switch from a variable to a fixed mortgage,” they admit at a bank branch in Madrid. And the employees of the entities do not have it at all easy, because the order is exactly the opposite: avoid this “transfer” and that the new loans that are sold are variable, making them more attractive than the fixed ones.
“A few months ago you saw an interest rate of 1% APR or even lower in fixed rates. But now it’s almost impossible to find anything below 2%,” they say from another national financial institution. They admit that in recent weeks the number of requests to change the terms of the loan has skyrocketed, but it will take a few months to know the official data as the INE publishes them with months delay.
However, the sources consulted confirm the trend. In this scenario, is it worth changing the terms of the loan and what can a customer do if their monthly installment has gotten out of hand?
The government’s first vice president, Nadia Calviño, announced this week that her ministry is already working with entities to help families who may be struggling with the rise in Euribor. The idea is not to set a ceiling on mortgage rates as United We Can is proposing, nor to create a fund to help those affected, as the ERCo is proposing to the unions.
Rather, it would be a matter of “strengthening” the Code of Good Banking Practices. Especially since measures such as the cap on the variables would leave those underwriting fixed mortgages unsupported at the time, paying more expensive interest in exchange for a Euribor hedge against which the variables, on the other hand, benefited during years of negative interest rates.
Apart from the negotiations with the government, some entities have been applying their own measures for some time to deal with their troubled customers. For example, Banco Sabadell strengthens the services of Sogeviso, the subsidiary through which it manages its vulnerable customers. Other entities ensure that they adhere to the measures laid down in the law and the Code of Good Practices to which they adhere.
This code establishes a set of rights for customers who cannot withdraw their installments:
-The bank may not charge interest on late payment higher than the normal rate plus 2% on the outstanding capital.
-The bank has one month to prepare a debt restructuring plan with new conditions. Of course, the entity can also refuse the request, in case the applicant is not in the exclusion threshold or if he is already immersed in an implementation procedure.
-The adjustments must include a minimum capital shortfall of five years, an interest of Euribor plus 0.25% during that period and an extension of the mortgage term to 40 years. Despite these measures, it is possible that the monthly amount to be paid exceeds 50% of the family income. In that case, the restructuring plan is considered unfeasible.
-If that happens, the customer would have the right to date the payment (when the bank cancels the debt in full to keep the house). But that should be the last option. As explained by Laura Martínez, spokesperson for iAhorro, the customer can try to improve the conditions with his entity (novation). Or switch banks through a subrogation. The last option, and the most expensive, is to cancel the mortgage.
According to experts, subrogation is only interesting in the first term of the mortgage, because more interest is paid in the first years. “If we have about 10 years left on the loan, we are certainly not interested in changing banks,” they indicate.
In addition, this type of operation also has a cost that, according to Martínez, can be between 1,000 and 2,000 euros, depending on the amount of the mortgage and whether there is a penalty (depreciation fee) for implementing the change.
In return, the change of bank usually provides more opportunities than the novation to eliminate another set of costs, such as life or home insurance associated with the loan.
Since 2019, the Real Estate Loan Act stipulates that if a novation or subrogation of a variable mortgage is carried out to a fixed mortgage, the maximum commission must be 0.15% (on the amount to be paid) if the loan is in the three early maturities. is located. . If the mortgage was taken out longer ago, no commission will be charged, so these conditions must also be taken into account when making the operation cheaper.
The client should also take into account that not all variable mortgages are equally affected by the current rise in the Euribor, as everything will depend on the year in which it was concluded. Yes, in the first, more interest is paid, and as the years go by, the principal becomes heavier, until at the end of the loan, only this part is practically paid.
So, assuming a mortgage of 150,000 euros in Euribor plus 1.5% interest and a term of 25 years (assuming no early repayment), the experts at the portal Idealista.com calculate that for someone who has a contract If you have taken out a variable mortgage in August 2021, the increase in the monthly payment to be paid will be 118 euros (1,421 euros per year). The amount will be reduced to 104 euros per month (1,245 euros per year) if she were to hire her in 2018 and only 44 euros per month (528 per year) if she was hired in 2005.
“Whoever decides the change should not expect rates of 1.5% unless he is a public servant,” ironically from a financial institution. They agree with the experts that in the current environment an interest rate between 2% and 3% is sufficient for an average mortgage. “Below 2%, we’re talking about a very good profile,” they tell iAhorro.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
