After almost two years of increases, several banks We started to announce in recent weeks slight discounts in types mortgages They are marketing. In fact, new loans for home purchases have already fallen since then. From 3.86% in October to 3.79% in NovemberAlmost the first drop since January 2022 European Central Bank It began to tighten monetary policy to combat rising inflation). Behind this is the expectation that central banks will take action. discount rates Officially through 2024 market reference rates and gave margins to organizations to make loans cheaper.
Thus, the price of mortgages is formed in case they are in question. variable typefrom euribor (Decreased from 4.16% in October) at 3.679% range) and in the following cases flat ratebased on interest Treasury bond It has been on the market for 10 years (the rate dropped from over 4% in October to the current level) 3.25%). One is added to these reference types margin to encompass the different costs What does lending mean for organizations, plus cousin among others, risk of non-payment of the customer they assume.
More important is the significant reduction in price. insurance rented by banks cover losses in loans such as mortgages. Contents Interest Rate Swap (IRS) measures the average rate of financial derivatives that banks contract to avoid losing money on loans if market interest rates rise or fall above certain levels. It is understood that the index in question reflects the following: money cost within a certain period of time no risk premium. So if the IRS goes down, banks place to make it cheaper Mortgages that they attempt to sell to their customers without increasing the risk of loss.
down margin
In December, the five-year IRS, which the Bank of Spain uses as a reference, recorded a significant decrease compared to the previous year. From 3.102% to 2.589% in November. This is by far the biggest drop since the regulator started publishing the data in October 2012. In fact, in two months the index has fallen by an unprecedented amount. almost 0.8 points percentage points from the maximum of 3.386% reached in October. As a result, it closed last year at the lowest level. From September 2022.
Something the IRS can predict continue to decline If the ECB starts cutting official interest rates this year, which it could do “unless another major shock occurs,” he said. Of course I can do this quickly Slow Yes, the market is moving as the central bank insists too optimistic about the onset and speed of the down cycle. President of the institution, Christine Lagarde, A few days ago, he warned that it was “likely” that the first outage would occur in the summer and not in the spring as investors had predicted.
Risk of loss
But just because the IRS has dropped sharply doesn’t mean new mortgage rates will be the same size. HE Bank of Spain warned last spring I watched Particular care should be taken to ensure that new mortgages issued by organizations do not have too low an interest rate; cause losses The agency found that new loan rates increased less than reference rates (IRS in different terms) increased.
A. narrow differential A situation that is commercially attractive to gain business between both species, high risk It is anticipated that the loan will cause losses for the bank if the macro-financial conditions at the time the loan is given deviate from the expected ones. For example, if the entity finds it more expensive More than expected to be financed by the current rise in interest rates deposit and increase in cost wholesale financing (provided by issues from the ECB and entities in the capital markets).
narrow differential
The Bank of Spain makes its predictions by calculating the interest rate. every new mortgage given – weighted by the capital loaned – regarding the IRS (One year for variable interest loans, maturity date of the loan for fixed interest loans). Between 2004 and 2022The average difference between new mortgages and the IRS was: 194.4 points baseline (1,944 percentage points). However, while it was 218.2 basis points at the end of 2020, it decreased to 127 basis points at the end of 2021 and to only 26 basis points at the end of 2022. It stabilized in April last year. 24 points basic knowledge.
Now banks are in the decision-making phase. how much do they move The decline in market rates for new mortgages, also taking into account that retail financing (deposits) has become more expensive. Financial sources think the most logical thing would be: cheapen credit to win business but also Less than what the IRS deducted widening the gap as it is at historical lows and represents a risk factor. But they also recognize that this will depend on how competition between assets develops.