The 12-month Euribor, an index used to calculate the interest on variable mortgages, has staged a record rise so far this year. After closing January with a value close to its all-time low (-0.477%), its price shot up due to rumors of rate hikes from the European Central Bank, which ended up materializing in July, September and October. Thus, the Euribor exceeded 0% in April, 1% in August and 2% in September, and it is likely that it will reach 3% before the end of the year.
The bank, as is logical, is now trying to increase its production of variable mortgages to take advantage of this spectacular increase, since this way more money will enter in interest. And to achieve this objective, many entities have made their fixed-rate mortgage loans more expensive and have given variable-rate ones greater visibility.
Given this scenario, what can a mortgaged future do to protect itself from the rising Euribor? According to the financial comparator HelpMyCash.com, you have up to three options: look for a fixed mortgage that still has an attractive interest, opt for a mixed rate so that the installments are stable during the first years of the term or sign at a variable interest and negotiate the inclusion of a ceiling clause.
The most effective way to protect yourself from the Euribor is to take out a fixed mortgage. As the interest on these products is constant, their installments remain unchanged throughout the repayment term. In other words, the client will always pay the same amount each month, regardless of the price of the reference indices.
This option, however, has a significant drawback: they are increasingly expensive. Logically, with a rising Euribor, banks are interested in having their clients mortgage themselves at a variable rate, hence their fixed interest rates. At the moment, the average fixed rate is around 3.25%, when at the beginning of this year it was around 1.50%.
Even so, according to HelpMyCash analysts, you can still find offers of this class with interest of around 2%. For example, the BBVA Fixed Mortgage, whose rate is from 2.05% to 30 years if the payroll is domiciled and the bank's home and life insurance is contracted. Now, you have to hurry to process the application to avoid increases.
In case of not finding an attractive fixed mortgage, the client can opt for a mixed interest. In this way, a fixed rate will be applied to you during the first five, ten or 15 years (it depends on each offer), during which you will pay stable installments, and a variable rate when that initial period ends.
In general, the initial fixed rate of mixed mortgages is lower than that of fixed ones, which makes it possible to pay more affordable installments in the first years. EVO Banco's Flexible Smart Mortgage, for example, has a fixed interest rate of 1.85% for five years and a variable rate of Euribor plus 0.75% for the rest of the term, in exchange for the customer domiciling their income and purchase home and life insurance with the bank.
From HelpMyCash they warn, yes, that the interest on these mortgages becomes variable once their period at a fixed rate has expired. And if the Euribor continues at high values by then, the fees can skyrocket. Therefore, if the mortgagee can afford it, it is advisable to carry out partial repayments periodically. Thus, you will be able to choose between shortening your term, with which you will be exposed to the Euribor for less time, or reducing the amount of the monthly payments so that they rise less if this index is rising.
Finally, if the applicant has no choice but to contract a variable mortgage, it is recommended that they choose an offer with a reduced differential, which is the fixed percentage that is added to the Euribor to calculate the interest on these products. Logically, the lower this differential, the lower the rate applied and the less the monthly installments will rise in the event that the Euribor continues to rise.
Likewise, the client can try to negotiate the inclusion of a ceiling clause, that is, to limit the maximum interest that the variable mortgage will have if the Euribor rises. In this way, the quotas may not exceed a certain amount no matter how much this index is trading upwards.
According to HelpMyCash, negotiating a ceiling is very complicated, because for the bank it means losing potential interest income. Even so, there are already entities that are open to this possibility or that openly offer it. This is the case, for example, of the Mari Carmen Plus Mortgage in Abanca. This has an interest from 2.49% fixed the first year and from Euribor plus 1.05% from the second, but between the second and the sixth year, the bank limits the increase in this index to 3.5%. In other words, if it exceeds this value, the interest may not exceed 4.55% during those five years.
