It seems that the Euribor is beginning to moderate. After remaining skyrocketing for more than a year and a half (it went from being negative to exceeding 4%), the average value of this index, used mainly to calculate the interest on variable mortgages, closed August at 4.073%. Although its price is still very high, it is a slightly lower figure than in July (4.149%), which could indicate a change in trend.
Given this situation, it is logical to ask if it is time to take out a variable rate mortgage loan to finance the purchase of a home, which would be beneficial if the Euribor falls in the short term, or if it is better to protect yourself with a fixed interest rate. According to the banking comparator HelpMyCash.com, it cannot be known now which is the most convenient option, because everything will depend on the evolution of the index, but taking out a fixed mortgage can still be a good idea if your interest is competitive.
The comparator's analysts affirm that the Euribor is indeed beginning to moderate, but that it could still rise a little more until the end of the year. And it is likely that the European Central Bank will increase its rates again in September or October to contain inflation in the eurozone, which is still around 5% and is very far from the 2% target. If this increase occurs, the mortgage index would trade slightly higher in the coming months and would stagnate between 4% and 4.5% at the end of 2023.
From there, it is practically impossible to predict the evolution of the Euribor, since it will depend on the progress of the European economy and whether inflation rises or falls. If its value remains high in the medium term, getting a fixed-rate mortgage will be the most convenient option. On the other hand, if it falls within a few years and does not shoot up again, choosing a variable interest rate will be more worthwhile.
Taking out a fixed mortgage, therefore, can be a good option for clients who are less tolerant of risk, that is, for those who want to pay a stable installment protected from the fluctuations of the Euribor. But not at any price: according to HelpMyCash, it is recommended that your interest be around 3%, as it is a historically competitive rate that allows you to pay relatively affordable monthly payments.
It should also be taken into account that, if the Euribor falls in the short term, it is likely that banks will offer cheaper fixed mortgages, as happened a few years ago. In this scenario, the holders of these products may try to refinance their loan to reduce their interest and pay less each month, either through an agreement with the entity itself or with a change of bank.
Nowadays, however, it is not easy to find fixed mortgages at a good price, since banks have made them more expensive to guide their clients towards variable rates (with which they earn more money due to the high Euribor). On average, according to HelpMyCash, these products have an interest rate of around 3.60%, but there are many entities that offer rates close to 4%.
Even so, there are still a few banks that offer fixed rates of 3% or lower. This is the case, for example, of the BBVA Fixed Mortgage: its interest is from 2.90% for a term of up to 30 years if the client directs his payroll or pension and contracts home and amortization insurance through the entity. If none of these requirements are met, the applied rate will increase by one percentage point.
Likewise, there are entities that can offer similar conditions if the applicant is in a good financial situation and negotiates to reduce the price of their standard commercial offer. Requesting a fixed mortgage through a mortgage broker will increase the chances of getting an interest rate of 3% or below, since this professional knows which banks to go to and what to do to reach the best possible agreement.
If they do not get that interest rate of around 3%, clients with a low risk tolerance have an alternative that may be convenient: taking out a mixed-rate mortgage. In this way, they will be able to enjoy a fixed rate for a first period, which can last between three and 20 years depending on what the entity offers. The initial fixed amount of many mixed mortgages is around 3% or slightly lower, which ensures that you pay affordable installments while you apply.
EVO Banco's Flexible Smart Mortgage, for example, has a fixed interest rate of 2.45% for the first five years and a variable rate of Euribor plus 0.60% for the following years, as long as the client directs his payroll and contracts. home and life insurance with the entity. Both interests increase by 0.40 percentage points if the holder prefers not to meet any of these conditions.
Mixed mortgages, due to their configuration, are less safe than fixed mortgages, since their interest becomes variable when their initial period ends. In any case, the client can protect himself from possible increases in the Euribor if he repays a large part of the debt during the first years (to shorten its term) or if he refinances the loan to switch to a fixed rate or to reduce its differential.
