The Bank of Spain has confirmed that the twelve-month Euribor, the indicator most used in Spain to calculate the installments of variable mortgages, closed November lower, to 4.022% from 4.160% the previous month. Very good news for the majority of mortgage holders, but less good for those who think about an immediate reduction in their payment. The fall in the Euribor represents the second monthly decrease of the year, although its reduction will not make the installments of variable mortgages cheaper. This is one of the dates that most worries most mortgage holders. The other is to know if the free surrogacy will be extended.
These were the majority of the queries made by La Información users in the consultation that is organized every month together with iAhorro experts on housing. Now housing is one of the big problems that the new Government of Pedro Sánchez will have to address, and more specifically the newly established Ministry of Housing, led by Isabel Rodríguez. There are many challenges faced by the person who was spokesperson for the Executive in the last legislature, among which are increasing the public housing stock in Spain, launching the line of ICO guarantees promised by the Government last month May for young people who want to acquire their first home and give shape to the new Housing Law also approved last April.
On this occasion, iAhorro experts José Paino and Jesús Gutiérrez were the ones to resolve the doubts. When the drop in the Euribor will be noticed in the mortgage payment was one of the most asked questions. Here Gutiérrez recalled that the index has already reached its peak and is stabilizing and even, this month, going down. “If we make a parallel with what happened in 2008, when interest rates marked one of their highest points, they spent a couple of years at high levels before starting to fall; it was not until 2010 when they fell around 4 points. Therefore, we could predict that, if the Euribor follows the dynamics of other years, the fall will be slower than the rise,” which suggests that “it will not fall suddenly.”
Another issue that most concerns mortgage holders is subrogation. The year is ending and the period for it to be free has an expiration date. La Información already explained that the Ministry of Economy will have until the end of December to decide whether to extend the change of mortgage from variable to fixed rate at no cost, one of the measures adopted in Royal Decree-Law 19/2022, by which it was established a Code of Good Practices aimed at helping mortgage holders with problems due to the rise in the Euribor, the reference index for most variable rate loans in Spain.
Here the mortgage advisor Paino reminds that if the opposite is not decided, “we are going against the clock.” Indeed, on December 31 of this year, the possibility that commissions for mortgage cancellation or subrogation will no longer exist. And in this situation he explains that “there are different options so that people can continue changing that variable mortgage. What’s more, we have to look because next year there will be a differential to which they will have to add a Euribor of at least mo 3%, so you will be paying around 4% and there are both fixed and mixed mortgages that are much more competitive.”
How much can mortgage holders save in this situation? According to calculations made by iAhorro, this same operation, as of January 1, 2024, could cost between 2,500 and 5,000 euros for average mortgages of between 150,000 and 300,000 euros, respectively. “Normally, the subrogation commissions that banks usually have are 2% of the outstanding capital if the mortgage is subrogated during the first ten years of validity and, from there, it is reduced to 1.5%,” explains the Director of Mortgages of the comparator and mortgage advisor iAhorro, Simone Colombelli
The mixed mortgage, the queen of the market.
Finally, the experts recalled the star mortgage that mortgage holders are increasingly looking for today. It’s the mix. “The mixed mortgage is the star product of the entities right now, many banks did not have it and have had to remove it in recent months.”
When seeking refuge in such a mortgage in an attempt to reduce the mortgage payment by resorting to subrogation, the question arises as to how many years we set the fixed term. The experts ask to go further because “in addition to the fixed period that the banks will offer you, which each entity does in its own way, it would be necessary to look at exactly the initial mortgage capital: if we are talking about a small mortgage, between 80,000 and 100,000 euros It will not matter to you a little more if the fixed part is for three, five or ten years because in the second part the Euribor is going to affect you less.”
And he continues: “From 200,000 euros we do have to look at it in more detail, although I think that three years is a prudent time for the Euribor to drop and in 2027 it should be better than now.” And Gutiérrez remembers: “You have to look carefully at the commissions in case, in the future, when the fixed part ends, you can amortize or subrogate the mortgage at zero cost.”
For his part, Paino believes that before facing that decision “it is very important to study each case and not only in the present but also for the future, to see if we have an economic cushion… Maybe in three years I will be fine so that, in “In the future, you can change your mortgage if rates are high, but there are people who need greater security, for five or ten years.”