The Euribor, the reference index for variable mortgages, is already at 3.524% with one day to go before the end of February 2023. We have not seen a similar figure for more than 14 years, specifically since November 2008. In addition, everything indicates that it will continue to rise: “the European Central Bank (ECB) has raised official interest rates by 0.5% this month and if it raises them again by another 0.5% in March, they will reach 3, 5%, so it is very likely that we will see Euribor levels of around 4% before the summer”, says the director of Mortgages of the comparator and mortgage advisor iAhorro, Simone Colombelli.
This boom is causing serious problems for those who already have a variable rate mortgage. And it is that, one of the most direct consequences of the rise in the Euribor is the rise in the installments of the variable loans in force. For example, whoever took out a variable rate mortgage of 150,000 euros over 30 years in February last year, with a Euribor+0.99% differential, will have taken advantage of a year paying very little interest (in February 2022 the Euribor was negative, specifically at -0.335%), but now, with this month’s review, you will see how your fee increases from the 459.06 euros that you have paid up to now to the 750.31 euros that you will pay at least until it is your turn the next revision, in February 2024
If the mortgage were higher, the increase would also be higher: in a loan of 300,000 euros with the same conditions as in the previous case, we see that the fee will become more expensive up to 582.51 euros each month, going from 918.11 euros to 1,500.62 euro. This means an annual increase of 6,990.07 euros in the loan.
Subrogation, one of the options to alleviate the rise in Euribor
As a result of the enormous rise in the Euribor and the consequent increase in the cost of variable mortgages, the Government of Pedro Sánchez already announced at the end of 2022 that throughout this year 2023 the banks could not charge commissions to clients who want to amortize hypothetically subrogate it in order to Change your terms to better ones. Therefore, now, mortgage subrogations and cancellations are almost free, since users will only have to pay for the procedures associated with the operation, such as the appraisal of the home.
But is it still a good time to do a surrogacy? The director of iAhorro Mortgages Simone Colombelli offers offers in the market”. Colombelli adds that the biggest impediment to making this change is “lack of knowledge”: “Many people do not know what the rise in the Euribor can mean for their economy and, until They don’t see that they pay more, they don’t care. People do not compare and do not want to waste time changing their mortgage, nor do they know that the procedure is simple and that they can go to a comparator like iAhorro to help and advise them throughout the process.”
Although it is true that “most entities do not want to make subrogations, but prefer cancellations, that is, canceling the existing mortgage and opening a new one with other conditions,” adds the iAhorro spokesperson, in cancellation operations or full amortization of the loan either, banks can charge commissions throughout this year, so the price to pay for this operation would also be much lower and the savings in the mortgage payment could be quite significant. “The best thing is to do the calculations and compare,” advises Colombelli.
What mortgage offers are now on the market?
Despite the fact that the rise in the Euribor has been pushing up the interest rates of all mortgages, not just variable ones, Simone Colombelli affirms that “there are several formulas on the market that make for attractive offers”, and adds: ” This is something that doesn’t make much sense on paper, but it does make sense with a long-term vision.”
With respect to variable mortgages, according to the iAhorro Mortgage director, “obviously, they are becoming more expensive, but we see products with very low differentials that mean that whoever contracts them pays almost only the interest associated with the Euribor”, although the Banks, as they are interested in having users contract this type of product, are increasingly adapting it to the needs of users and are already seeing variable mortgages with a fixed tranche of up to two years.
Regarding mixed mortgages, we still see very attractive products: “Although they have risen a bit, there are many entities that are still positioning themselves with this product below 2% for a first 5-year fixed tranche”, explains Colombelli, who finished : “In two years we will surely not return to 1% or 2% of Euribor; most likely it will continue above 2%. The market goes through cycles and two years do not take us out of a cycle… five or years possibly ten if”.
