Notice from the Bank of Spain on variable mortgages

The Bank of Spain (BdE) launches an important notice for the variable rate mortgages. The central bank warns that it will lead to a “greater financial burden” after the rise in interest rates by the European Central Bank. A dramatic shift in monetary policy marked by the high rate of inflation worldwide, and that many citizens will be caught again, since occurs for the first time in 11 years.

The upward escalation being experienced by the Euribor, that is, the reference indicator for mortgages. But the consequences will also affect the fixed rate, although they will be affected in the long term, since “in Spain, financing conditions have begun to be less comfortable in recent months and, predictably, they could experience additional tightening in the near future”, says the Bank of Spain.

The director of Economy and Statistics of the national authority, Ángel Gavilán, reports that both families and the business network will end up being affected by the rise in interest rates: “If monetary costs increase, it is normal that this is transferred to the financing costs of households and companies. It is quite inevitable that it will end up moving.”

The Bank of Spain reports on how much mortgages will rise in 2022

Slightly tighter financial conditions expected than those that have prevailed in the recent past, in part, as a consequence of the progress in the process of normalization or tightening of monetary policy that the main world central banks are following, an aspect that could contribute to a certain moderation in the rate of expansion of activity”, forecast from the Bank of Spain.

To calculate how much will mortgages go up this yearthe first thing to keep in mind is that this month the Euribor exceeded its daily rate of 1%, standing at 1,067%. It is the first time, since last July 2012, that these figures have been seen, driven by the announcement by the European Central Bank (ECB) of raise interest rates as a shield against inflation.

According to the estimates of the financial user platform, ‘Asufin’, would close the year 2023 at 1.90%. Somewhat lower than those of the ECB. This would mean almost 3% interest, as indicated, for a common mortgage of 100,000 euros and 25 years, with a 1% differential. Something that would be worse, if the most pessimistic forecasts of the ECB are confirmed, between 800 and 1,400 euros per year.

Fixed or variable rate mortgage?

Against this background, the eternal question reemerges: choose between fixed or variable mortgage. There is not one better than another, but everything will depend on the context. “Fixed mortgages continue to represent a more stable scenario for many who decide to take out a mortgage at this time or seek to change it to a fixed mortgage.

Even so, it should be emphasized that, although it will be difficult for us to see mortgages below 1% again, it is still an optimal moment”, explains Sergio Carbajal, head of Mortgages at ‘Rastreator’. The particular recommendation of ‘Asufin’, in its III Mortgage Barometer, is that of subsidized variable mortgageswith an average APR of 2.30% (0.05% less than in July), followed by subsidized fixed rates with 2.35% (0.01% less than in July).


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