The Euribor picks up momentum again. After November and December in which the indicator had risen more slowly, in January it has advanced more than 0.3 points. It is the sixth largest rise in a single month since January 1999. The monthly average, of 3.333% in the absence of data from the last day (which can cause very slight fluctuations), implies that once again Spanish borrowers will witness the highest mortgage price that is remembered. On average, variable mortgages for home purchases that are revised with the data for the first month of the year will rise by almost 250 euros, that is, close to 3,000 euros more per year.
Several factors influence the increase in the cost of variable loans, which represent about seven out of ten outstanding mortgages in Spain. One is the level of the Euribor itself, the referential that is taken as the basis for calculating the installments in most contracts. But another is the difference compared to a year ago, something that has been very relevant in recent times because mortgages have gone from being very cheap in historical terms to being expensive in a short time. As most mortgages are recalculated once a year (although this can also happen every six months or with another frequency, as agreed), the difference between the current Euribor level and that of a year before is what determines whether the letter goes up or down. And that step has not stopped growing since October 2021, breaking its historical record in every month since last September.
For an average mortgage (137,921 euros in 2021, according to the INE, which has not yet published the final data for 2022) to be repaid in 24 years and with a differential of Euribor plus one point, the January review would mean paying 757.3 per month. euro. This is 247.6 euros more than a year ago (48.6% more), which multiplied by the 12 letters of the year means an extra cost for the borrower of 2,971 euros. It is the most abrupt mortgage increase since the Euribor began at the end of the last century.
If they continue to rise at the same rate as in recent times, mortgages will continue to become more expensive for at least a couple more months. In February and March of last year, although the growth trend was obvious, the indicator was still moving very slowly and that will make the year-on-year comparison unfavorable for those who review their quotas. In addition, all forecasts point to the Euribor going to continue climbing, pressured by the rate hikes from the European Central Bank (ECB).
The next increase in the official price of money is expected precisely this Thursday. That day the European monetary regulator will announce what is agreed at the last meeting of its Governing Council. In the last meeting, in December, rates were increased by half a point to leave them in total at 2.5%. And most analysts are betting on another similar increase this week. “This will result in a new rise in the Euribor,” sums up César Betanco, a mortgage expert at the Hipoo loan brokerage platform.
Betanco believes that this year the Euribor can rise to 4%, in line with the forecasts of the Spanish banking association, but that “it will stabilize at the end of 2023 or the beginning of 2024.” The ECB rates have an impact on the Euribor because the reference that most loans take is 12 months, which theoretically expresses the interest at which a group of eurozone banks are willing to make one-year loans among themselves. If they anticipate that the official price of money will rise, that affects the final value. And in a context in which the wave of inflation does not seem to be completely controlled and many other uncertainties aggravated by the war in Ukraine (such as energy costs) persist, the “storm” of which the expert speaks seems far from clearing up.
The expert maintains that this affects the balance between fixed and variable mortgages in the mortgage market. If historically the variables have dominated in Spain, for some time now the new loans that are signed are mostly fixed: around 70%, according to the National Institute of Statistics. But there are also included, due to the peculiarity with which this information is collected, the so-called mixed mortgages (which normally start with fixed interest and after a while begin to oscillate). Betanco points out that this formula is experiencing “a boom” right now because “the fixed interest that they give at the beginning is more interesting than a pure fixed.” But he also considers that, if the Euribor continues to rise, they will lose appeal: “The variables can become more competitive because the differential falls.” And it sends a message to those who already have a loan and are considering changing its conditions (novation) or taking it to another bank (subrogation): “You can still find interesting offers, but you have to do it before the Euribor goes up more.”
THE COUNTRY of the morning
Wake up with the analysis of the day by Berna González Harbor
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