The iAhorro mortgage comparator has published this Wednesday a new iAhorro Index in which it reviews the Spanish mortgage market during 2022, highlighting the last quarter of the year and comparing its data with those of the National Institute of Estadine. One of the most notable conclusions of this report is that the drop in spreads on variable mortgages as compensation for the rise in Euribor is not permeating mortgage futures, which are increasingly reluctant to sign this type of loan.
According to the data registered by iAhorro, last December variable mortgages were registered with very low differentials, up to 0.25%, when in January we saw differentials that could even reach 1.89%. What is the OBJETIVE? The banks want to make variable mortgages more attractive, but a Euribor that is already above 3% and the distrust that there is an economic level does not help. So much so that only 4.13% of the users who signed their mortgage through iAhorro in December chose a loan with a variable interest rate.
Remember that the TIN of the variable mortgage is calculated with the differential that is negotiated with the bank (which is always fixed, for example, that 0.25%) added to the average Euribor data for that month, which in December was 3.018 %. In this case, a variable mortgage signed in December 2022 has an interest rate of 3.268%.
Signing a mortgage with that interest rate and with the prospect that the Euribor will continue to rise in the next mortgage reviews, “only compensating those who did not get a fixed or mixed mortgage with a lower interest rate and who want to think that the Euribor can drop in the medium term, from then on, clearly contracting a low differential,” says the CEO of iAhorro, Marcel Beyer.
Fixed mortgages become more expensive, but they do not disappear
In addition to the rise in the Euribor, this year we have also seen how interest rates in the euro area went from zero to 2.5% in just four months. Since the European Central Bank announced the first rate hike (+0.5%) in July 2022, there have been at least three more: the second, on September 8, of +0.75 points; another just a month later, on October 27, also at +0.75 and the fourth and last, for now, was executed on December 28, when the ECB raised rates another 0.5 percentage points. And it seems that this trend will continue in 2023.
What has been the immediate consequence? The rise in interest rates on fixed-rate mortgages: “Although we currently find many fixed-rate mortgage offers below 3% TIN, many already exceed it. And in the coming months this could worsen and reach levels of 4% if the ECB continues to raise interest rates, as planned”, declares the CEO of iAhorro.
From the comparator they assure that the users who signed their mortgage with them in December 2022 achieved an average rate of 2.27%. If we compare this data with that of January (1.15%) of that same year, we see that the rise is real: more than one percentage point. So, is the fixed mortgage going to disappear from the market? Marcel Beyer is convinced that no: “The fixed mortgage is not going to disappear because there will come a point where it will be more profitable for banks to sell fixed mortgages at 4% than variable ones with a differential of 0.20% if the Euribor rises positions around 3%; that is, in this scenario the banks will earn more with the fixed ones than with the variable ones”.
In addition, the fixed mortgage continues to be the preferred mortgage futures. Of the total number of signatures registered by iAhorro in October, 80.43% were for fixed-rate mortgages; in November that percentage fell to 66.21% and in December it accounted for 60.09% of the total. And it is that, at a time of economic uncertainty, fixed mortgages provide stability and security. This is also shown by the figures published by the National Institute of Statistics, which in October indicated that 60.20% of those with mortgages opted for a fixed mortgage compared to 31.80% that replaced the variable.
Mixed mortgage, the great beneficiary: present in more than 30% of the firms
The mixed mortgage, which barely existed a year ago, has made a comeback and is becoming a very good alternative. According to iAhorro, more than 30% of the users who signed a mortgage last December opted for a mixed-rate mortgage, specifically 35.78% of the total. If we look at the evolution of that percentage throughout 2022, we see that until October the mixed mortgage firm barely represented between 8 and 3% of the total. However, in November (24.14%) and December this trend changed completely.
Why was there such a radical change? The CEO of iAhorro Marcel Beyer saw the first entities that positioned themselves aggressively in a mixed product, that is, with rates that were between 0.3 or 0.5 points below those of the fixed mortgage.”
Of course, from iAhorro they assure that they do not have a way to compare this data that they collect with that provided by an official source, since the National Institute of Statistics, which does publish mortgage data, does not publish specific data on mixed mortgage firms, since that include them within fixed mortgages. Why? Beyer attributes it to the fact that “this mortgage, in the first tranche (the first 5, 10 or 15 years), is governed by a fixed interest rate and later by a variable rate”, so at the time of writing they are directly fixed rate mortgages.