Variable, fixed or mixed mortgage: which option is better with a triggered Euribor?

The return of the Euribor to positive values ​​(0.

Thomas Osborne
Thomas Osborne
04 June 2022 Saturday 17:48
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Variable, fixed or mixed mortgage: which option is better with a triggered Euribor?

The return of the Euribor to positive values ​​(0.013% in April and 0.287% in May) has upset the mortgage market. Variable mortgages now have higher fees, because their interest is calculated with this index. This rise has also been transferred to fixed rates: banks are making these products more expensive to make them less attractive and thus encourage the contracting of their mortgage loans at a variable rate, with which they expect to earn more money in the medium term.

This generates many doubts among those who want to take out a mortgage to buy a home in the coming months. If they opt for a variable interest, they run the risk of paying increasingly expensive monthly payments in the coming years, because the forecast is that the Euribor will continue to rise. On the other hand, if they choose a fixed rate, their interest will be higher than with a variable mortgage (at least for now), which translates into a higher payment in the short term.

According to the financial comparator HelpMyCash.com, there is no perfect modality for all mortgage holders. To make the best decision, the ideal is for the client to choose a variable interest or a fixed interest (or mixed, which is a mixture of the two) taking into account their own preferences and their forecast of the trend that the Euribor may draw during the next years.

Let's say, for example, that the person looking for a mortgage is a person who wants to have all their expenses under control and who does not trust the fluctuations of the Euribor. According to HelpMyCash, fixed interest is the most suitable for clients with this profile, because as their interest is constant, it allows them to pay a stable fee forever. In exchange for this security, the mortgaged party will pay more in the short term than with a variable mortgage (their interest is currently higher), but, according to forecasts, it is expected that it will pay off in the long run if the Euribor maintains its upward trend, as indicated by the analysts of the financial comparator, as well as those responsible for the risk departments of several banks, such as Bankinter.

Finding an attractive fixed mortgage, however, is becoming increasingly difficult. As this modality is no longer convenient for banks because they expect to earn more money with their variable rates, they now offer fixed interest rates of around 2%, which are significantly higher than those applied at the end of last year (below the 1.50%). Even so, there are still a few entities that grant loans with fixed rates of less than 2%, which is still a reasonable interest rate, especially if one takes into account that in the past fixed mortgages were sold at 5%.

One of them is BBVA. Its Fixed Mortgage has an interest rate of 1.95%, which the client can obtain if he directs his salary and takes out the bank's home and life insurance. This loan has no opening commission, finances up to 80% of the purchase of a primary residence (70% of a second residence) and has a maximum repayment term of 30 years.

Let us now imagine that the future mortgaged party wants to pay low installments and believes that the Euribor will tend to stabilize after its latest increases. For this class of client, a variable interest is more appropriate: as variable mortgages have a lower interest than fixed ones currently, their monthly payments are cheaper. It can also be a good deal for those people with the necessary economic capacity to repay the loan ahead of time and thus anticipate the more than possible increases in the Euribor.

Now, whether it is a client profile or another, applicants must be aware that the forecast is that the Euribor will continue to rise and that it is very likely that their installments will become more expensive in the coming years. For this reason, according to HelpMyCash, it is only advisable to opt for this modality if you have sufficient financial resources to face a sudden increase in monthly payments. From this comparator they recommend returning the money in a short period of time or making partial amortizations periodically with the aim of reducing the risk of suffering possible increases in the Euribor.

These clients can take advantage of the current commercial war waged by the banks in the sector of variable mortgages. Numerous entities have lowered the interests of these products to encourage their contracting, in such a way that it is not difficult to contract a loan with a variable rate of around the Euribor plus 0.90% or less. It should be noted that the average interest on these products exceeded the Euribor plus 1% at the end of last year.

The Open Variable Mortgage from Openbank, for example, is one of the best within this modality. Its interest is from Euribor plus 0.89% (1.69% fixed during the first year), which the client can obtain if he directs his recurring income and takes out home insurance with the bank. In addition, this rate can be lowered by 0.10 percentage points if the amount of the loan exceeds 150,000 euros. Openbank does not charge an opening fee and finances up to 80% of the purchase of a main residence (70% for a second residence), with a maximum term of 30 years.

We must not forget a third modality: that of mixed interest. Mixed mortgages have a fixed interest during the first period, which usually lasts about ten years, and a variable interest for the rest of the term. In general, they are not the best option for the most prudent clients, because their interest is only fixed during the first years of the life of the loan (later it becomes variable linked to the Euribor). Nor are they for the most daring, since the variable interest is not applied from the beginning.

Even so, contracting a mixed mortgage can be interesting for a client who wants to pay a low and stable installment in the first years and has the savings capacity to make periodic early repayments. As the initial interest of these products is usually lower than that of the standard fixed ones, their monthly payments are cheaper in the first years. If the mortgaged advances debt, you can shorten your return period to be less time exposed to the Euribor when your interest becomes variable.

Those interested in this modality, yes, have fewer offers to choose from, because most banks do not sell mixed mortgages. All the financial institutions that grant loans of this type appear on the HelpMyCash website and their conditions can be compared until you find the most attractive mixed mortgage.