A recent report from the Bank of Spain, on household savings accumulated during the pandemic, concludes that a "modest, but growing since 2021, part of said savings" was allocated to the repayment of housing loans.
One of the reasons, the report points out, was the growing increase in the cost of variable mortgages. With the increases in interest rates between 2022 and 2023, early repayments proliferate and are prioritized, in order to avoid the increase in the price of the installments referenced by the Euribor.
The Government eliminated commissions for early repayment of variable mortgages until December 31, 2023, by Royal Decree-Law 19/2022. This is a favorable option, say experts from the comprehensive home platform Housfy, to reduce the amount of the installments and not see such serious effects due to the rising price of the Euribor.
For those who do not have a good financial cushion or wish to allocate it to other projects, an equally valid alternative is to go from variable to fixed interest, a maneuver also free of charge by the same Royal Decree-Law until the end of 2023 as long as the bank does not suffer a loss. financial.
For contracts subject to the Mortgage Law of 2019 (after June 16, 2019), the bank may charge compensation of up to 2% for early repayment of a fixed mortgage, as long as the commission does not exceed the financial loss that the banking entity suffers.
However, as long as the European Central Bank's interest rates (currently at 4%) remain higher than the interest on mortgages already formalized, the amortization would produce a capital gain for the bank and, therefore, it would not be legal to collect no compensation for interest rate risk.
When families rushed to advance the debt on their variable mortgages in 2022, the market also did not offer them any remuneration for their savings through other liquid assets, such as fixed-term deposits. The money saved was losing value with inflation and families had an easy time making decisions.
Today, we find deposits on the market with returns close to 3% and interest-bearing accounts around 2.5% APR.
Among the factors to assess whether it is worth paying off a mortgage, it is worth considering the interest that remains to be paid. With the French amortization system, the one used by most banks in our country, a holder pays more interest at the beginning of the loan and begins to amortize more capital later.
Those who are in the final stretch of their loan, and especially if it is at a fixed rate, should consider whether to use that money to settle their debt with the bank or invest it in assets that give a higher return than the amount of interest they owe. you still have to pay.
