Despite the fact that in 2022 historical data was recorded in terms of home sales, the rise in the Euribor and interest rates could cause the real estate market to suffer a bit throughout this year 2023.
Banks have been making their mortgage offer more expensive in recent months due to the rise in official interest rates by the Bank will also continue. At the moment, for the next month of March, a 0.5% rise in rates is expected, which will already reach 3.5%, a level that we have not seen since November 2008, more than 14 years ago.
How is this influencing future buyers? There are already many who intend to buy a home, but now they are considering the possibility of waiting a few months for the price of real estate to drop due to the drop in demand. At the moment, according to the director of Mortgages of the comparator and mortgage adviser iAhorro, Simone Colombelli “we are not experiencing a substantial drop in demand and, as long as the demand for sales does not drop, surely prices will not drop either.”
How much do we have to lower the price of the house to make up for the wait?
Colombelli assures that, “yes, it is true that prices are expected to be certain and a possible drop, although it is surely very slight and depends a lot on the areas where the homes are located.” According to him, there are many of the predictions made by both banks and real estate portals. For example, from Bankinter’s analysis department they point out that this year house prices “will enter the adjustment phase, with falls of 3% in 2023 and 2% in 2024”. However, these drops, they add from pisos.com “will depend on each market”. In other words, in Madrid and Barcelona no major changes in housing prices are expected due to the balance that exists between supply and demand.
Now, knowing that the expected drop in prices is not very significant, the big question is: is it worth waiting to buy a home? The director of iAhorro Mortgages is clear about this: “The key is not to wait for the price of the house to drop or to negotiate it down with the seller, but to negotiate the interest rate on the mortgage with the bank, which is what influences the most in the quota that you are going to pay”. Colombelli also adds that “even if prices drop from here for a few months, interest rates will surely continue to rise, so the best time to buy a home is now; the sooner, the better.”
To support this maintained, from the mortgage comparator they have made the calculations captured in a real example:
A person who wants to buy a house for 200,000 euros now must contribute a 20% down payment, so they would sign a mortgage of 160,000 euros. If you decide to repay that money in 25 years with a fixed-rate mortgage whose TIN is 3%, you would pay 758.44 euros in installments each month. In the event that the banks apply the rate hike provided by the ECB and increase the rates of that fixed mortgage up to 3.5% TIN, but housing prices do not fall, the installment of that same mortgage would rise to 801 euros, which implies an increase in cost of just over 40 euros per month. However, if you decide to wait for house prices to drop, to offset the expected 0.5% rise in interest rates, the house price should fall by at least 5%: this is how you would buy a 190,000-euro house with a mortgage of 152,000 euros at 25 years and a fixed TIN of 3.5%, whose installment would remain at 760.95 euros, almost the same as if you sign your mortgage now.
“With these calculations, at iAhorro we are even being conservative, since interest rates on fixed mortgages may exceed 4% in a few months because the Euribor is already at 3.5% and, to nothing that adds a We are already seeing a 0.5% differential of 4% now in both variable and fixed mortgages; mixed mortgages are still below 3%,” adds Simone Colombelli.
Negotiating a drop in the TIN, the best option to save
For the iAhorro mortgage director, the best way to save on the mortgage is to “negotiate with the bank to lower the interest rate.” So much so that, with the same previous example, from the comparator it ensures that if you get a drop of one point in the TIN, that the fixed mortgage goes from having an interest rate of 3% to having one of 2%, you could save more than 24,000 euros throughout the life of the loan, since instead of paying
How can this interest reduction be achieved? “Hiring products linked to the loan is one of the most used ways to reduce mortgage interest: take home insurance, life insurance with the bank that gives you the mortgage, direct deposit your payroll, invest in their investment funds and even Contracting with a company with which the entity with the alarm in your home has an agreement can lower the TIN of your mortgage by one point or more”, says Colombelli, who admits that “negotiating with the bank is not easy and, therefore, it is a of the work of iAhorro”.
