Only five years ago, nine out of ten mortgages that were contracted in Spain were at a variable rate. In recent months, the trend has almost reversed and less than 30% are made at a variable rate. Today, despite the fact that the rates of these fixed mortgages are already around 3%, the psychosis about the abrupt increase in Euribor in the last half year leads clients to seek refuge outside of variable-rate loans.
While some financial entities say they can't cope with requests for renewals and subrogations, others limit themselves to recognizing that there are many queries, but that it will be a long period of changes. Financial sources explain: "We expect queries and requests in the coming months when clients with variable-rate mortgages receive the review of installments." Even so, the banks in recent months formalized the majority of fixed-rate mortgages.
If the Euribor stopped rising today, over the next 12 months all customers with variable interest loans would see their monthly installment increase by up to 50%. It is at that moment – when the revision arrives – when clients usually request a change of conditions and that is when the fixed mortgage option appears.
José García Montalvo, Professor of Economics at Pompeu Fabra University (UPF), points out that the movement of clients towards fixed-rate mortgages "is herd behavior derived from the strong pressure on the street due to fear of what may come in the future." Sources from one of the main Spanish banks explain that what clients demand most are the fixed rates that existed until this summer and that they were below 2%. Something that – they insist – is now impossible.
In fact, the official statistics of the INE show –as can be seen in the graph– that the great movement of renegotiation of interest rate conditions (novations) took place last year. “In novations, which are interest rate changes within the entity itself, what we have seen is that 2021 was a year of effervescence. Now things have slowed down quite a bit because conditions are not the most optimistic”, according to Leyre López, an analyst at the Spanish Mortgage Association (AHE). "There are no longer such attractive offers with fixed rates below 2%," she adds.
Is it worth changing from variable to fixed?
“It depends on how much you think the Euribor is going to rise. If you think that the good benchmark is the US, where the average 30-year rate is 7%, then yes. The problem is that if someone really knew what the evolution of the Euribor would be, they would be rich”, jokes García Montalvo. Nobody expected that in half a year, the Euribor would go from negative to positive levels as has happened in Europe. “I still think that there is a lot of alarmism when the main problem to pay mortgage payments is unemployment. And now the labor market is holding up”, specifies the UPF professor.
From the sector, the director of financing and means of payment of Banc Sabadell, Javier Gaztelu, reflects that "whether a fixed or variable rate mortgage is more convenient depends on the conditions of the client, on whether he wants to be sure of having a constant payment or if you prefer, due to your conditions and financial situation, be subject to changes in interest rates”. Fixed-rate mortgages will always be more expensive than variable ones at the time of contracting because, in reality, what the client does is pay a premium to have "insurance" against future increases.
Leyre López insists that "from the association we believe that the proportion of fixed-rate and variable-rate mortgages will tend to balance out." The last AHE report in June showed that there is still 70% of the portfolio referenced to a variable rate. They are 20 points less than five years ago.
Spain along with Portugal, Greece and Italy are almost the only European countries where there is such an overwhelming presence of the variable rate mortgage. Banks point out that it makes no sense to transfer the risk of having a variable-rate mortgage to the client.
