GONZALO BERNARDOS | Gonzalo Bernardos warns of consequences of ‘mortgage war’ between banks
He who warns is not a traitor, and Gonzalo Bernardos This statement could well be awarded. The economist has been warning for months that lower interest rates would translate to “mortgage warThat is, banks will open a “credit tap” reduction in the price of money and they will offer loans on more favorable terms to attract new customers. This situation has “arrived” this Thursday, says the expert, because European Central Bank (ECB) approved the second consecutive reduction in the base rate by 25 basis points, which was reduced to 3.25%.
The European Central Bank (ECB) began cutting interest rates in June after eight years of continuous increases. This reduction continued last month and was ratified again this Thursday. A decrease in the price of money is always good news for families’ pockets and for mortgages, but it is also important to say that this affects economic growth. In fact, the ECB, like the International Monetary Fund, does not hide the fact that the reasons for its decision are relief from inflationbut also fears of an economic downturn.
Immediate effect on mortgage
If interest rates fall, Mortgage rates are falling, it’s as simple as that. Cause? Euribor, the benchmark index for most variable-rate loans, is closely linked to the ECB’s price of money. It has dipped below 3% in recent weeks and closed September at an average of 2.936%, the lowest in two years. In this sense, it is worth remembering that just 12 months ago it was above 4%.
All this led to “Mortgage war” between banks is inevitable. “The mortgage loan will be used as hook to get a good client for many years“, the economist warned on his YouTube channel. This Thursday he confirmed his words, giving an example: “Now you can get a mixed mortgage, the interest rate for which for the first five years is 1.5%,” he published on X , former Twitter.
“They don’t offer it to everyone.”
The expert’s statement must be taken into account, but it is also true that the trend is different. High-interest blended loans were the star of the market in the second half of 2023 and the first half of 2024. Fixed rate mortgages are again the main protagonist of the Euribor fall: The struggle between banks is such that they offer loans at 3% for a period of 30 years.
The economist also said that “There will be entities that will provide mortgages up to 100% from the appraised value of the house.” But we must not forget that the bank always wins. Such offers or a mixed rate of 1.5% for five years “are not offered to everyone”– he reminded. While banks reserve them for “clients with sufficient solvency and confidence“, comments on YouTube.