“I did not expect such an intense climb. I used to pay around €570 a month and now I pay €780”. The person who expresses himself in this way is Borja Carmona, a Catalan citizen and holder of a 40-year variable mortgage whose installments have become more expensive in 2023. He will pay about €2,500 more than expected until his next review.
He is not the only one: an average variable mortgage would become about €300 a month more expensive with the last Euribor. Given this, the director of the banking business of Housfy Hipotecas, a mortgage brokerage service, gives some advice to those affected such as Borja to improve the conditions of their loan.
This is the eighth consecutive rise in a year. In July 2022, the institution responsible for monetary policy in the euro area began to periodically increase interest rates on main refinancing operations, which today have reached 4%.
Christine Lagarde, president of the ECB, assured at the press conference that "inflation has decreased, but it is expected to remain too high for too long." Although the CPI in Spain fell to 3.2% in May, average inflation in the euro area is 6.1%, according to Eurostat.
Interest rate increases are part of the measures that central banks use to cool the economy and maintain price stability. "The tightening of financing conditions," Lagarde recalled, is one of the indications that this will happen, "since demand is expected to slow down each time."
The ECB aspires to contain headline inflation at an average of 5.4% in 2023, 3% in 2024 and 2.2% in 2025. Analysts are confident that, for this purpose, rates will remain high for as long as necessary until the objective is secured, and then a de-escalation will begin towards the second half of 2024.
This latest increase of 25 basis points confirms a moderation in the rate (there have been 50 and 75), although a similar increase in July or September would place rates at 2008 levels:
The Euribor until now resisted passing the 4% barrier. With the ECB's latest decision, the benchmark variable mortgage index will soon be hovering above those levels in just a few days.
Those with variable-rate mortgages, which also account for the vast majority of outstanding mortgage loans in our country, are the ones who are experiencing the most direct impact on their installments. With a review of the conditions in June 2023, an average mortgage in Spain would become €297 more expensive per month, which translates into an additional €3,564 per year.
David Espiago, ambassador of Housfy Hipotecas, tells us that what is being done the most —and by far— is canceling the mortgage with the current bank and opening a new mortgage with another bank that offers better conditions. It is also the one that the expert recommends the most, because with it you can remodel the debt and the terms to be paid.
The simplest and most economical, admits Espiago, is the subrogation of the mortgage, which consists of transferring the same mortgage to another bank, although with this the holder will modify, above all, the interest rate at which his loan is paid.
The interviewee regrets that the financial entity with which he signed his loan has not been very receptive. When asked why he opted for a variable loan, he is honest: "They gave me no other option."
They have also not given you the opportunity now to improve your mortgage. But changing banks seems the most effective option, warns Espiago: “If you are a good payer, your bank will not want to negotiate a change in conditions. Also, you may have to face a commission.”
David Espiago, spokesman for Housfy Hipotecas, summarizes the ways in which mortgagees can lower their mortgage in this video:
Housfy processed a record number of renegotiations last month. At this point, "part of those affected already have a solution," says the expert, "but unfortunately there are still many to help."
