The indicator puts its average monthly interest rate at 3.005%, making some variable rate mortgages more expensive by more than 3,000 euros per year
It was the most difficult year for people with mortgages since the last financial crisis. The Euribor, the index to which most home loans in Spain refer, took a small breather this Friday by lowering its daily rate by 37 thousandths to 3.288%. But this cut doesn’t seem to be enough, so that in the absence of Friday’s session, the indicator will fall to an average of more than 3% this month for the first time since the last financial crisis.
Despite the drop on Thursday, the December average even remains at 3.005%. This means that for a 25-year mortgage of EUR 180,000 with a 1% Euribor difference that is reviewed annually, the compensation will increase from approximately EUR 640 to EUR 950. That is about 310 euros more per month. Another example. For an average loan of 150,000 euros over 30 years with the same difference, the additional cost would be 3,192 euros (266 euros per month).
However, it should be taken into account that not all mortgagees are affected equally, as everything depends on the year in which the mortgage was taken out. And it is that in the first case it is when more interest is paid and as the years go by the principal takes on greater weight until at the end of the loan practically only this part is paid.
Despite everything, the rate of increase is undoubtedly historic, taking into account that the Euribor started the year with a negative rate of -0.499%. However, the date that will be etched in the fire among those with a mortgage is April 12, 2022. That was the day the indicator entered positive territory for the first time since 2016, in the heat of the first signs pointing to an increase in the rates by the European Central Bank (ECB).
After the summer, once it was confirmed that the monetary body would accelerate the unwinding of stimulus, the Euribor surpassed 2% in September. And with abrupt day-to-day gains, it broke the dreaded 3% barrier in the daily rate on December 19, coinciding with a speech by Christine Lagarde in which the President of the ECB made it clear that the rate hikes implemented since the summer… reference rate to 2.5% – are far from over.
Given this scenario, the situation is also not rosy for mortgage futures, which now face a supply from banks that is much less attractive than in recent years with negative interest rates. «Until a few months ago, rates of 1.5% were virtually unproblematic to find. Now if you find 3%-3.5% at a flat rate, don’t let it escape,” they state from a national financial institution.
The latest data from the National Institute of Statistics (INE) leaves no doubt that the new banking strategy – encouraging variable mortgages rather than fixed mortgages to take advantage of the rise in interest rates – is driving them more business – produces its first results. Specifically, 66.8% of new loans signed in October had a fixed interest rate. A high percentage, but one that has dropped significantly from the previous month’s 68.2%. You have to go back to December 2021 to see numbers below 70%.
In order to avoid the impact of the increase in the Euribor, the banks have started to comply these weeks with the pact launched by the government with a new protocol of good practices to protect vulnerable customers.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
