After six years in negative territory, the sprint that since this summer has been marking the Euribor, the indicator to which the vast majority of variable-rate mortgages in Spain are referenced, is causing important changes in the real estate market. One of them has to do with the acceleration that is taking place in sales -buyers and sellers advance transactions to avoid, the former, the more than foreseeable slowdown in activity and, the latter, a higher increase in financial costs.
The other effect is in the increase in the number of mortgages that are changing their conditions to go from variable to fixed rate. These changes explain, in part, the dynamism that this market has been registering in recent months in a context that is becoming less favourable. The European Central Bank (ECB) took a turn in its monetary policy last July to control a historically high annual inflation rate (it remains in the maximum zone in November at 10%, according to Eurostat).
The rate hikes initiated since then by the issuer have placed the price of money at 2.5% in December, its highest level since the end of 2008, and have boosted the index that measures the interest at which the large banks in the region pay lend money to each other one year ahead at maximums of the last fourteen years, above 3%. To avoid being affected by a larger increase, there are families that have chosen to try to renegotiate the conditions of the loans with their entity.
In October alone, a month in which registered mortgages in property registries reached 41,022, their highest figure for that month since the 2009 financial crisis, 10,198 home purchase loans were modified in some way. Of that amount, 35.3% achieved changes in interest rates. Thus, the percentage of fixed-interest mortgages doubled, going from 24.2% to 53.3%, while variable-interest mortgages followed the opposite path and went from representing 75% to 44.9%.
They cancel mortgages and constitute them with new conditions
To expedite these changes as much as possible (which is of interest to customers because they avoid making their loans more expensive), entities are canceling mortgages and constituting them with the new conditions instead of opting for the novation or change of conditions -and even of the subrogation or change of entity-. In practice, this option allows the entity to charge more through commissions, since with the subrogation or novation option, only the expenses generated by the cancellation of the loans can be passed on.
The plan recently approved by the Government to alleviate the mortgage burden on vulnerable households or middle-class households at risk of vulnerability also presented measures that may also worsen mortgaged households that fall outside these assumptions. One of them is the elimination of commissions for early repayment and for conversion from a variable rate to a fixed rate over the next year.
The latest mortgage reform, approved in 2019, set a ceiling of 0.25% on the early repayment commission that banks could apply during the first three years in which the loans would be in force; and one of 0.15% in the case of the first five years. In the case of novation, the maximum commission to be applied by the entity is 0.15%, but it can only be required for the first three years.
Spanish households continue to show a clear preference for home purchase compared to other European countries. Thus, 75.9% of families own a home compared to 60.3% of the Eurozone average, and 45.2% have a second home, according to data from the Family Financial Survey published by the Central Bank. European. This statistic reflects how the method of financing these properties is, in the vast majority of cases, the mortgage loan, so that almost 57% of home-owning families have a living mortgage.