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The mortgage index is close to 2% in monthly rate and announces fewer and more expensive loans

For banking, the new scenario is full of paradoxes. The unstoppable rise of the Euribor has two faces. The good news is that thousands of Spaniards are anticipating the decision to buy a house and, therefore, to take out a mortgage. The objective is to avoid new rises in the price of loans such as those that have already caused the free flight of the Euribor to the gates of 2% in monthly rate. In the daily it already exceeds 2.2%.

Although the cost of mortgages has already climbed a lot, the general perception is that a new rise is inevitable because the forecasts for rate increases are terrible for mortgage holders. Market expectations happen because the official price of money closes 2022 at a minimum of 2%. And there is no doubt that they will continue in 2023, taking the Euribor clearly above 2.5%. The immediate future is frightening.

And even the vice president of the ECB, the Spanish Luis de Guindos, has spoken about it. The former Minister of Economy of Mariano Rajoy has encouraged savers to approach financial institutions to demand improvements in the payment of accounts, but at the same time has indicated that those mortgaged should hurry to review their rates and/or request new ones as soon as possible mortgages in anticipation of the unstoppable rise in rates.

For the vice president of the European Central Bank (ECB), there will be a change in trend in the real estate market in the Eurozone, after years of strong growth in prices and mortgage credit. Guindos has recognized that certain changes are being seen (expectations, types and demand) that could lead to a fall in housing prices.

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new raises

“A rate hike of 100 basis points is already being considered at the next meeting of the US Federal Reserve. That puts brutal pressure on the ECB, which is far behind. The problem now is that a ceiling on the rise in the price of money in the euro zone cannot be rigorously established. It is like driving at night without lights and on a road with many curves”, they graphically point out in a large Spanish entity.

With these cards on the table, today’s mortgage prices may end up being a bargain compared to one or two quarters from now. Most banks are already applying rates above 3% at a fixed rate, but there are already voices warning of the possibility of increases not too far away in time to levels between 4% and 5%. In this context, the volume of activity is extraordinary and can be maintained throughout the year.

The bank has reasons to celebrate the moment. Only in the first seven months of the year, it has formalized operations for more than 40,000 million euros, when in all of last year it did not reach 60,000 million. Therefore, it would be in a position to break levels not seen since the first decade of the century, when mortgage activity broke all historical records in Spain and was a key player in the bursting of the real estate bubble.

The other side of the coin for banks is that, for the time being, they have failed miserably in their objective of transferring the demand for fixed mortgages -they continue to account for almost three-quarters of new contracts- to variable ones, which now offer much higher returns. succulent for banking. The sector has to continue selling the vast majority of fixed loans, whose margins are significantly lower even though prices have more than doubled.

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In summary, the banking mortgage business continues to be booming despite the fact that the real estate market seems headed for a sure slowdown that is already beginning to be seen in the big figures. However, there is so much demand dammed up since the appearance of Covid-19 that mortgage activity is not threatened in the short term. If the fall comes, the bank will be well loaded with operations after a 2022 that will break many records.

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