Mortgages and consumer loans, how much they become more expensive with the rise in rates | My money

The banking showcase for mortgages is changing rapidly with rising interest rates. The rapid upturn in the Euribor has reinforced interest in the security offered by fixed-rate mortgages, while for banks the variable rate is once again attractive as a means of higher margins. According to data from the Bank of Spain, mortgage credit has clearly become more expensive so far this year, from the 1.44% average rate on new mortgages in January to 2.03% in August.

Whoever is now looking for a fixed-rate mortgage will have to assume an interest of around 3% in the best of cases. There are already few entities that offer a fixed rate below that level, with the exception of 2.53% of Evo Banco at 25 years or 2.81% of BBVA in online contracting at 15 years. Online contracting reserves the best offers, while in the traditional branch the fixed interest is already close to 4%, such as Bankinter’s 3.54% 20-year APR and Santander’s 4.19% APR on their mortgages subsidized.

The maximum connection significantly lowers the price, by around one point, which happens by direct debiting payroll and receipts and by contracting home and life insurance and, in the case of CaixaBank, the anti-theft alarm system for the home.

According to Banco Santander sources, “customers in recent years have demanded more fixed-rate mortgage loans (82% in favor of the fixed rate in 2021, and similar figures so far in 2022). Although, right now, in recent weeks, requests for variable mortgages have increased compared to previous months”.

The price of mortgages has risen sharply due to the rise in the Euribor. The bank updates its offer almost every week

In variable rates, the best offers are around the spread of 60 basis points over the Euribor, which in September marked an average of 2.233%. They are therefore aligned with the best prices that can be found in a fixed mortgage –in which the best conditions are being reserved for the most solvent clients–, at a time of maximums for the mortgage index.

BBVA offers a spread of 60 basis points over the Euribor and Bankinter, an initial rate of 1.25% the first year and a spread of 0.75 over the Euribor thereafter, resulting in a 3.43% APR with linkage. Without it, the interest rises to 4.47% APR. And in the midst of a dilemma about whether to choose fixed or variable, mixed mortgages have also resurfaced, with an initial fixed section and another variable until the end of the credit.

Consumer loans

The price of consumer loans is also rising in line with the rise in interest rates, although with somewhat less intensity than mortgages. The weighted average rate of new consumer financing has gone from 6.6% in January to 7.09% in August, according to data from the Bank of Spain.

Consumer loans are a good indicator of the strength of an economy and at a time when inflation is beginning to take its toll on households, the first signs of a certain weakening are beginning to emerge. According to CaixaBank Research, in the third quarter a step back is being taken in domestic consumption and card activity in Spain grew at a slower rate than in the second quarter, “pointing to a slowdown as a result of inflationary pressures”.

Entities often resort to pre-approved consumer loans, after having filtered the best profiles

In this context, financial entities are going to be more selective in granting consumer credit and pre-granting, for which there is already a prior filter of the most solvent clientele, is going to be a formula on the rise. “The granting of consumer credit is based on pre-granting, which ensures responsible credit management,” they acknowledge at CaixaBank.

From Banco Santander they affirm that they must be “vigilant” in the granting of consumer credit, “in a situation of high inflation, loss of purchasing power and decrease in disposable income, which could cause over-indebtedness in some consumers.” For the moment, they assure that “demand has remained stable and continues to be, with good levels of activity”. Santander offers a consumer loan at 9.65% APR, calculated for an amount of 12,000 euros for a term of seven years and with an opening commission of 2.25%.

Contracting exclusively through the internet lowers the cost. Bankinter eliminates the opening commission if the contracting process is carried out one hundred percent online and offers a credit from 4.54% APR for an amount of 12,000 euros over 10 years. At CaixaBank they offer a consumer loan at 7.76% APR, without opening or cancellation fees, for an amount of 6,575 euros in 68 installments. And in Ibercaja the APR of a personal loan for home renovations is a minimum of 6.42% for an amount of up to 60,000 euros.

The analysis of the customer’s solvency and his relationship with the bank are in any case the factors that determine the definitive conditions of the consumer loan, as recognized by the entities.