Mortgage Market Shifts in 2022 and the Ripple Effect on Monthly Payments
The year 2022 left a clear before-and-after impression on the mortgage market. The year began much like it ended, yet Euribor swung to its highest annual rise in history, climbing from -0.477% in January to 2.884% in December. Those levels haven’t been seen since December 2008, and the movement touched both new borrowers and, more intensely, existing variable-rate loans where monthly payments rose sharply.
What drove the Euribor surge and the accompanying jump in mortgage costs? According to iAhorro’s mortgage director, Simone Colombelli, Euribor is highly sensitive to broader economic conditions and policy directions. He explains that the European Central Bank (ECB) keeps a close eye on Euribor, and the macroeconomic environment—along with the disruption from the Russia-Ukraine conflict—created a notably chaotic backdrop. Inflation and energy prices followed suit, sending electricity, gas, oil, and key raw materials higher. In January 2022, inflation stood at 6.1%, rising to 7.6% in February and peaking at 10.8% in July, before the ECB began taking decisive steps to curb inflationary pressure.
Since March 2016, ECB policy rates had remained near zero, but the central bank moved gradually to tighten. From July through December, four rate increases were implemented, bringing the ECB’s reference rate to 2.5%. While inflation eased to 6.8% in November, the higher rates nevertheless weighed on mortgage lending and monthly repayments for many households.
Almost 40% of iAhorro Users Pursue Mortgage Amendments
To temper rising mortgage payments, many borrowers with variable-rate loans sought to modify their financing terms. iAhorro’s data show demand for mortgage amendments rising significantly. Simone Colombelli notes that the number of users seeking changes through iAhorro doubled early in the year. In January, 17.39% of visitors who used the mortgage comparison tool signed a mortgage amendment, while the rate approached 30% by August. It’s important to account for the typical processing timeline: about three months elapse from submission to signing, which explains why the turning point appears later in the year. According to Colombelli, April marked Euribor returning to positive territory after years of negative readings, and the trend toward more amendments gained momentum. By August, the substitution from variable to fixed mortgages was evident, and by September to November, a substantial share of amendments filed in November had already been processed in September. (attribution: iAhorro)
New Mortgages: Higher Costs and Fewer Fixed-Rate Options
The rise in rates shifted supply and demand toward variable-rate products, and lenders began pricing fixed-rate mortgages higher to discourage their use. The result was a widening gap between fixed and variable rates. The average fixed rate among iAhorro users climbed to 2.13% in November, while the average variable rate remained at about 0.52%. The differential reached roughly 1.61 percentage points, the widest gap recorded in iAhorro’s data set. This dynamic has made fixed-rate financing progressively less attractive for new borrowers.
Looking ahead to late 2022 and into 2023, banks showed growing reluctance to offer fixed-rate products, and when they did, rates frequently exceeded 3%. For borrowers seeking alternatives, a hybrid mortgage emerged as a notably appealing option. The hybrid structure combines a fixed initial period with a future switch to variable terms, offering payment stability early on while preserving flexibility down the line. (attribution: iAhorro)
In practice, roughly one in four users who finalize mortgages through iAhorro opt for a hybrid arrangement. For individuals who want certainty at the start but prefer not to lock into a traditional fixed-rate, a hybrid loan can be a practical compromise. It provides a fixed initial payment before allowing adjustments when the variable portion begins. (attribution: iAhorro)