Hiring a mortgage is much more expensive now than a year ago. In fact, financing the purchase of a home costs a little more than double, according to the Bank of Spain. The latest Statistical Bulletin published by this body reflects a notable increase in the cost of loans granted to buy houses and apartments: between January and December 2022, the equivalent annual rate of mortgages, which measures the total cost of these products in interest and other expenses , rose from 1.54% to 3.12%.
According to the financial comparator HelpMyCash.com, inflation is the main reason for this increase, since the measures taken by the European Central Bank to contain it triggered the Euribor, which is the index used to calculate the interest on variable mortgages. And the future does not look very encouraging for those who want to take out a loan in the coming months to buy a home: forecasts suggest that the price of mortgage loans will continue to rise.
High inflation in the euro area has not only made the shopping basket or fuel more expensive: it has also affected the price of mortgages. From the first months of 2022, the CPI for all the countries in the euro zone shot up to levels never seen since the launch of the community currency. In February it exceeded 5%, in June it exceeded 8% and in November it was above 10.5%.
To contain the meteoric rise in prices, the European Central Bank (ECB) was forced to act. In February 2022, it already announced that it was considering raising its main interest, that is, the rate that applies to entities that request financing. The first increase occurred in July and further increases were carried out in September, October and December. Following this escalation, the main ECB rate went from 0% to 2.5% in 2022, while in February 2023 it rose again to 3%.
The increase in the rates of the European Central Bank had a full impact on the Euribor, which is an index that represents the interest at which the main banking entities of the continent lend money to each other. As these banks had to pay more to finance themselves through the ECB, they increased the price of their interbank loans, which triggered the value of the Euribor: it rose from -0.477% to 3.018% between January and December 2022.
The rise in the Euribor triggered the price of variable mortgages, whose interest depends on this index. Many banks reduced the spread of these products (the part that is added to the index) to smooth the increase, but without actually offsetting it. According to HelpMyCash, a variable interest of Euribor plus 1% represented a rate of 0.523% in January 2022, while one of Euribor plus 0.60% at the end of the year reached 3.618%.
The banks, likewise, made their fixed mortgages more expensive; partly to maintain their profit margins, partly to encourage them to borrow at variable rates (with which they hoped to make more money). Thus, according to the analysts of the financial comparator, the average interest on these products rose from the 1.5% that was offered in January 2022 to close to 3.5% that was applied at the end of last year.
It should be noted, however, that not all banks made their fixed mortgages more expensive in the same way. For example, today you can still find competitive offers such as the BBVA Fixed Mortgage or the EVO Banco Smart Mortgage, both with an interest rate from 2.80% that can be obtained in exchange for domiciling the income and contracting the entity's home and life insurance.
However, forecasts suggest that fixed mortgages, like variable ones, will become more expensive again in 2023. According to HelpMyCash, it is very likely that the European Central Bank will keep its rates rising to contain inflation (evidenced by the increase in February ). From the comparator they predict, in this sense, that the Euribor will be between 3.5% and 4% at the end of the first quarter of this year, which will increase the price of loans for the purchase of housing.
Therefore, if a person wants to buy a home in the coming months, it is recommended that they hurry up to request their mortgage. The longer it takes to process your application, the more likely interest rates on these products will go up and the less chance you have of getting a competitively priced home loan.