Wednesday, January 19

The reign of fixed-rate mortgages is consolidated

The realm of fixed-rate mortgages consolidates. This type of mortgage loan already represents more than 60 percent of new loans.

Specifically, 62.4 percent of those signed in September (latest known data). In the last four years, fixed-rate mortgages have grown 24 points.

The fixed rate has been growing unstoppably, but it was 2020 the year in which this change in trend was consolidated, when it reached half of the loans that were signed (52 percent of the mortgaged ones opted for it).

If you look a little further back, the difference is even greater: in 2017, those who preferred a fixed-rate mortgage were 35 percent.

Conversely, variable rate mortgages have been the major victims: currently they are 26 percent and a year ago they represented 32 percent.

Nevertheless, the mixed mortgage, which is the least frequent option, remains stable: in the last year, 5 percent of buyers have requested it, as it happened in 2020.

The mortgage war has been the driving force behind these types of mortgages

There are several reasons that have facilitated the rise of fixed-rate mortgages. On the one hand, the mortgage war waged by the banks, offering increasingly competitive credits, which are around 1 percent (or even below for solid financial profiles).

“This drive for fixed-rate mortgage loans is the consequence of the mortgage battle that financial institutions are waging as they try to compete against Euribor levels,” explains MarĂ­a Matos, Director of Studies and Fotocasa spokesperson

This year, we have seen historical drops in the price of interest rates applied to credits and loans, which has encouraged citizens to choose this option at very good prices.

For instance, The last two banks to apply reductions to their fixed rate mortgages have been Openbank and ING.

Openbank clients will have the following options: a TIN interest from 1.15 percent (1.35 percent APR) for those who finance their home up to 15 years up to 1.35 percent TIN (1.49 percent APR) for loans with a term of between 26 and 30 years.

In the case of the Dutch bank, it has also cut its fixed-rate loans by 10 basis points.

The Fixed ORANGE Mortgage places its new installment at 1.40 percent (previously at 1.50%), while the Variable Mortgage remains unchanged in Euribor plus 0.89 percent.

A Euribor at minimum

The other determining factor for this reign of fixed-rate mortgages is the fall of the Euribor, which remains at record lows.

The indicator has been in negative territory since February 2016. Faced with this situation, banks offer more mortgages at a fixed rate since stable income is guaranteed for a long period of time (the duration of the mortgage).

Secondly, your net interest income is prevented from suffering with further falls in the Euribor, which negatively affect the income they obtain from their banking business, being increasingly reduced in this way.

In addition, bank forecasts estimate that the index to which most mortgages are referenced, which is around -0.50 percent, could remain negative until 2031 even if the ECB raised rates at the end of 2023.

How much is requested and for how long

On average, individuals over 18 years of age who want to acquire a home through a mortgage ask for up to 66 percent of the price.

It is a similar figure to that of the previous year when, on average, mortgage loans were requested for a value of 67 percent of the house, they point out from Fotocasa.

Another aspect that defines mortgages and mortgage planning is the term in which it is going to be paid. And in this respect there are no big changes compared to previous years.

A) Yes, longer terms (above 30 years) are stable with historical data: 16 percent of buyers who get mortgaged exceed that term.

The bulk, however, is concentrated between 20 and 30 years of loan duration: 53 percent in 2021 compared to 54 percent in 2020. Only 10 percent are mortgaged for less than 10 years.