Do you have a fixed or variable mortgage? How the ECB interest rate hike will affect you

Do you have a fixed or variable mortgage?  How the ECB interest rate hike will affect you


The European Central Bank (ECB) raised interest rates by half a percentage point last Thursday, up to 0.50%, the first increase in 11 years and the most intense since 2000, with the aim of curbing the progression of inflation. This decision is intended to curb price increases in Europe will lead to an inevitable rise in Euribor, and a general increase in mortgage priceswhich will continue to corner Spanish families despite fierce competition from the banking sector.

The Euribor is the indicator they refer to referenced most adjustable rate mortgagesrepresenting seven out of ten loans had already anticipated this increase and in a year, since June 2021, it has gone from one Negative interest from 0.484% to 0.852% which marked the end of last month. This increase in Euribor depends on the volume of the mortgage leads to a more or less high increase in the monthly feebut there is also a lot of uncertainty as to what level the indicator may reach, so everyone can know how much their mortgage could go up and gauge its resilience.

This exercise, experts agree, is important for the consumer to assess whether it is convenient for him to protect himself from future increases in Euribor and to close without the conclusion of complex products, Convert your mortgage into a fixed rate loan. While this is initially more expensive, it always guarantees the same fee. The Bank of Spain recommends keeping accounts on the bank customer portal and taking good care of the change, but if you finally decide to switch from an adjustable rate mortgage to a fixed rate mortgage, she explains there is three ways to do this: a novation, a recourse, or a new mortgage. In the first case, the customer will resort to his own bank to change this Mortgage Conditions and if you are convinced of the offer, which you must examine and formalize before a notary, you must pay the company a commission based on the outstanding amount.

However, in surrogacy the customer transfers his mortgage to another entity. To do this, the new bank must make you a binding offer with the conditions of the new mortgage, whereby your previous company has the right to adjust or even improve it. Associated expenses to transfer a mortgage are usually higher to those of novation, the Bank of Spain recalls. After all, the customer always has the option sign a new mortgage and cancel the previous one in advance, although this option is usually the least chosen because It requires more paperwork and higher costs.

Fixed rate mortgages

In recent years, in connection with historically low interest rates in Europe, Spanish companies they improved their range of fixed-rate mortgages, which until then was a testimonial product. In February 2012 it was not even 6%. Along with the assurance that the customer will have an identical lifetime mortgage payment, the offer earlier this year was so competitive nearly 77% of new mortgages signed under these conditions.

In view of the rise in Euribor and the foreseeable interest rate hikes, the banks have also adjusted their range of fixed-rate mortgages and tightened their conditions, although this type of loan has been common up to now, according to Asufin “fairly profitable” for the sector. Fixed-rate mortgages have increased on average over the past five years 1.8% more expensive than variables; a customer paid an average of 113.57 euros more per month 1,362.84 euros more per year and 6,814.20 euros more in the five years.

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