Euribor, the most used reference index to calculate variable mortgage rates in Europe, was 2,828% in November. This value is 0.2 points higher than the value recorded by this indicator in October (2.629%), but it is true that Euribor has experienced a slowdown in its monthly gains from 2.233% in the last two months. It was recorded in September. “If we look at the trend of other years, At the end of the year, Euribor has always moderated its growth a bit.”, explains the Mortgages manager. iSavingsSimone Colombelli.
However, there are no valid predictions this year. “The increase we’ve seen in Euribor this year (more than 3% from -0.477% recorded in January to 2.828 this month in November) has been anything but. totally exceptional being outside of market dynamics; This is something we have never seen in the history of Euribor,” recalls Colombelli. “Everything shows that Euribor will not stop in the short to medium term.”
Raise between 250 and 500 euros per month
This has a direct impact on those who already have variable rate mortgages and have to do an annual review of their quota this month. It was -0.487% in November 2021, so whoever got a contract 150.000 Euro variable rate mortgage with 0.99% margin + Euribor with 30 years repayment, From paying 448.98 euros per month you would have to pay 691.52 euros, which means an increase in your mortgage of 242.54 euros per month or the same 2,910.48 euros per year.
If the total amount of the mortgage is: 300.000 Euros, on the same terms in the previous case, the monthly fee will become almost 500 euros more expensive; Specifically, it will go from paying 897.96 euros per month to 1,383.03 euros per month. In this case, the annual increase will be 5,820.84 euros.
How does this affect guilt?
Just last week, the Pedro Sánchez Government launched a plan of measures to try to ease the mortgage burden of those most vulnerable due to the increase in Euribor. The manager of iAhorro Mortgages assures that this is also done to reduce the default that banks can start to notice as families fail to pay. “Increase in mortgage installments of fairer clients“For the average family, it can have a very significant medium-term impact on delinquency, as the rise in costs is brutal,” said the Mortgages manager at iAhorro.
Colombelli also analyzes that “in 2021, for example, the fairest customers who used mortgages when interest rates were very low may now have serious problems paying their installments due to the increase in Euribor.” And this situation is not an exception. “There are about six million live or active mortgages in Spain, with a very important mortgage park.and most of these mortgages are variable rate,” he says, adding that “Euribor’s impact on mortgages in this country is very significant.”
Likewise, with this situation, customers who want to request a housing loan but have some difficulty in paying their monthly installments will have much more difficulty in the bank’s lending to them. The Bank of Spain recommends not spending more than 30-35% of monthly net salary on housing, and financial institutions are very strict about this rule. So, with interest rates rising, these people will now be able to buy houses cheaper than they can afford at lower rates. “And it’s not that banks have been more stringent with the rise in Euribor.On the contrary, such a client who exceeds debt ratios will find it impossible to request and issue a mortgage”, explains Simone Colombelli.
Source: Informacion
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