The impressive rise in the Euribor after more than six years in negative values has meant a significant change for mortgage payments in Spain. Just three months ago, this value turned positive again, something that had not happened since 2016 and, since then, it has shot up to exceed 1%, the highest value in the last decade.
This rise, motivated by the energy and economic crisis caused by the war in Ukraine, has completely disrupted the mortgage market as we knew it until now. Variable mortgages are the ones that have suffered the most from these effects, reaching much higher installments. However, fixed-rate mortgages have also been influenced by the sudden change, as banks have begun to make them more expensive to encourage contracting at a variable rate.
[This is how the uncontrolled rise in the Euribor affects you if you have a mortgage]
In a situation like this, there are many who consider what is the best type of mortgage to contract if you want to buy a home in the coming months. While those who opt for variable interest fear seeing their monthly payments increase due to the uncertainty caused by the rise in the Euribor, those who are considering choosing a fixed interest rate will have to make a higher outlay in the short term.
Choosing between a fixed or variable rate mortgage is one of the great uncertainties for citizens. The truth is that the duration and amount to repay the mortgage loan or the expectations of interest rates can be variables to consider when choosing one or the other. There is, however, no clear decision on this matter.
But what is the best type of mortgage to choose with the increase in the Euribor? Is it better to bet on a fixed, variable or mixed interest mortgage?
Fixed-rate mortgages offer a main advantage to customers who hire them: stability. Opting for them will always allow you to know in advance the total amount to be paid and, in addition, the monthly installments that we will have to pay.
However, the client who opts for them will always pay more in the short term than with a variable-rate mortgage (although the Euribor is currently higher). To choose them, it is necessary to assess whether the upward trend in interest rates will continue over the next few years, as financial analysts expect.
The rise in prices that the fixed interests of this type of mortgage have starred in recent weeks after the increase in the Euribor does not help, however, to opt for them. In fact, these interests are currently around 2%, a very high price if we compare them with those applied just over half a year ago, which were around 1.5%.
[The Euribor makes mortgages more expensive by more than 400 euros on average per year]
If fixed-rate mortgages gave stability, those with variable interest will be for those who trust in the drop in the Euribor in the short or medium term. In general, the installments of this type of loan are usually lower, although the rise in interest rates has triggered them in recent weeks.
However, the recent increases in fixed-rate mortgages continue to make them a good option to pay less money in the short term. In fact, despite the rise in the Euribor, the monthly installments of this type of mortgage are still cheaper than those of the fixed rate.
Now, numerous banking entities have chosen to lower the interests of these products to encourage their contracting. Even so, the forecasts that mark the upward trend of the Euribor in the coming months are not very encouraging for customers who end up opting for this type of loan. It can be a good option if you have a good economy that allows you to face the increase in monthly payments.
[Caixabank breaks the consensus and 'passes' the variable mortgage]