The Euribor has been rising relentlessly for 12 months. The average monthly benchmark indicator for most mortgages in Spain reached 0.852% in June, which is the highest level since August 2012 and the largest monthly increase in history.
This tell us that it is no longer advisable to take out a variable rate mortgage? It depends on the rates set by the European Central Bank, which in turn will depend on inflation and European economies.
Fear of rate hikes led to more fixed-rate mortgages being signed in April than ever before: more than 75% of the loans signed were fixed-rate. We propose the three scenarios, which according to Idealista, could occur in the future.
First scenario: Euribor rises to 1.5% in 2023
Una primera fase de subida del euríbor hasta el 1,5% en 2023, alcanzando el 2% en 2024 y permaneciendo estable alrededor del 2% durante el resto de la vida del préstamo. En este caso el préstamo fijo es claramente más favorable, con un ahorro de 4.232 euros respecto a variable.
Second scenario: rapid climbs of the Euribor
Rapid increases in Euribor to curb inflation, reaching 2.5% already in 2023. Between 2024 and 2028, a second phase of progressive cuts (0.5 points per annum) aimed at stemming the possible slowdown of European economies and preventing recession, reaching a minimum of 0.5% in 2027 and 2028. Thereafter, a stable four-year scenario with Euribor at around 1% followed by a gradual rise to around 2%. In this situation there are hardly any differences between fixed and variable loans.
Third scenario: lower rates from 2024
Again, a rapid initial rise of the Euribor to 2.5% in 2023. Subsequently, we proposed a scenario of more intense recession and rate reduction as early as 2024, reaching a minimum of 0.5% between 2026 and 2028, to move on to a scenario of normalisation, with a progressive increase to reach 2%. Here the variable loan would be the most favourable option, as €1,296 less would be paid.
OCU understands that in a transaction as long-term as a mortgage, with maturities of 20 years or more, it is better to be prudent and not rash. Short-term decisions should not be taken on the basis of an extraordinary and probably temporary situation such as the invasion of Ukraine and the out-of-control of inflation that it is causing.
OCU recalls that between 2007 and 2008 there was a steady rise in the Euribor, which some entities took advantage of to place their clients multi-currency mortgages, mainly in Japanese yen, because of their low interest rates. Immediately thereafter, the Euribor plummeted to negative rates, while the euro plummeted against other currencies, causing large losses to mortgages in other currencies.
The organisation recommends that consumers with variable-rate mortgages should have enough savings or income to cope with the increases in fees that always occur over the life of the loan, bearing in mind that this is a very long-term operation. Now is the time to use those savings to cope with the increase in quotas.
Finally, we leave you with a selection of properties that you will find available in our website.
1. House for sale in Vilobí del Penedès
House located in the town of Vilobí del Penedès, 60 kms from Barcelona and its airport. In the heart of the Penedès, an idyllic area full of nature, vineyards and tranquility.
- 4 bedrooms
- 2 bathrooms
- 322 m2
2. House completely renovated with 1.300m2 of land
House completely renovated in the middle of nature. In the village of La Llacuna, in the mountains of Penedès. It has 1.300m2 of forest and the house consists of 98m2, plus an annex building that serves as a warehouse.
- 4 bedrooms
- 1 bathrooms
- 98 m2
