this average rate of new mortgage It rose from 1.38% at the end of last year to 2.03% in August.According to data from the Bank of Spain. Average 28-year fixed rate mortgage offers on mortgage portals, currently between 2% and 4.55% How will new increases in the official price of money announced by the European Central Bank affect mortgages? According to the idealista.com portal, new fixed-rate mortgage installments of 170,000 euros passed in 28 years From 585 euros at the beginning of the year to 754 euros today. The 0.75 percentage point increase (from 2%) the ECB decided on the official price of money this Thursday could add another 60 euros to the monthly fee.
More than 2.5 points increase so far this year
The rise in the official price of money causes an increase in the interest rates that financial institutions charge on mortgages and consumer loans, which provides financing for companies. In July, the one-year Euribor (the benchmark index for mortgage prices) had already started to rise in July, long before the European Central Bank’s (ECB) first official rise in the money price in 11 years. slightly higher than last December. The trend has intensified since April and accelerated (after the ECB’s first decision) in July and September, when the Central Bank increased the official price of money by 0.75 points to 1.25 percent. Like this Euribor climbed to 2,233% in September from a historic low of -0.505% in November.. It’s already over 2.7% lately. That makes mortgage payments more expensive, and the ECB will do so more significantly this Thursday (0.75 points) and in the coming months, after what was announced. Also, new loans are more expensive. Average interest on new mortgages rose to 2.03% in August from 1.38% at the end of last year, while average interest on consumer loans rose to 7.09% from 6.1%, according to data from the Bank of Spain. .
How much do monthly installments increase?
According to Idealist/mortgage data, the average mortgage demanded by Spaniards in 2022 is €171,238, which must be repaid over 28 years. Earlier this year, the first year fee for claimants was around 1%, while it was 585 euros per month, whereas today signatories would be paying 754 (at 3% interest). euros per month. Those who rent at 4% interest will pay 848 euros. If the interest rate reaches 5%, the fee will increase to 948 Euros, and if it reaches 6%, the fee will increase to 1,053 Euros.
What will happen from now on?
To the extent that the ECB raises rates more or less, Home financing will continue to be more expensive More or less, this Thursday’s rise in particular won’t be the last except surprise. With the increase in interest rates, the number of families who have difficulties in meeting their payments and will not be able to access credit to buy a house will increase.
The most vulnerable families
If mortgages continue to rise at the same rate, the percentage of financially weak families understood to be dedicating more than 40% of their gross income to paying off debt will soon reach 14%, as the Bank’s president warned. Spain, Pablo Hernández de Cos at the Congress of Deputies. Currently, as announced this Thursday by César González-Bueno, CEO of Banco Sabadell, Number of mortgages at risk ‘not significant’ due to rise in interest rates and Euribor in Spain Since 2016, 75% of new loans for home purchases are at a flat rate.
Digits expelled from the market
According to real estate portal Idealista.com, the increase in rates has so far exported 12% of families able to obtain mortgages from the home buying market. “While effective rates were 1%, only 1.8% of applications were rejected due to lack of income, but with the current 3%, the rejection percentage rises to 11.9%,” the portal says. For these calculations, more than 14,000 mortgage applications for home purchases managed by the portal in 2022 with more than 20 financial institutions were analyzed and operations where the applicant clearly did not meet the core banking risk criteria were excluded. He concludes that “in the hypothetical situation where effective rates reach 4%, almost 30% of current applicants will not have access to the purchasing market”. By autonomous communities, study shows The Balearic Islands as a community where more families interested in buying do not comply with the rule of not exceeding 35% of their income for the payment of the mortgage installment: 18.9%. In the case of Catalonia, it is calculated that 12.3% of the applications will be rejected in a 3% interest rate environment, and this rate will reach 21.2% in a 4% interest rate environment.