Four million customers to benefit from mortgage rate cuts

The fall in interest rates will be a lifeline for four million people with variable-rate mortgages who have seen their repayments increase month after month in recent years. Now, under the new conditions, banks are preparing to reduce monthly payments by an average of around €50 starting in the second half of the year.

The European Central Bank approved a 0.25 point cut in interest rates in June, leaving them at 4.25%. Earlier, in May, the Euribor fell slightly to 3.68% from 3.703% in April. Rates remain “high”, offers have improved somewhat, and the number of mortgages taken out in our country is growing: in the first four months of the year, it has accumulated an increase of 23%.

As financial sources confirm to Confidencial Digital, banks have begun to negatively depreciate mortgages that are indexed to the six-month Euribor rate, and for those considering it at twelve, which is the majority of clients, they have been doing so since May or June.

The 12-month Euribor rate averaged 3.609% in January, down from 3.679% in December. This is the third month in a row that the index has been falling. It was 4.022% in November and 4.160% in October.

It should be noted that during this time, variable mortgages have increased in price by an average of 200 euros per month, which has caused a wave of requests to banks to change the terms of the loan and, in turn, has provoked changes in other offices.

More than four million people with variable mortgages were severely punished by the increase.

Banks have decided to negotiate with their clients to reduce the differential (the percentage that is added to the Euribor rate to calculate the instalment) so that they do not change their variable mortgages to fixed rates. They have even offered discounts of up to €100 on the monthly mortgage payment.

This difference typically varies depending on each customer’s relationship, i.e. the products they have contracted with, such as insurance or mutual funds, with variations that can range from as little as a quarter of a point (in some mortgages issued many years ago) to as much as three percentage points.

With the Euribor rate free to rise, fixed-rate mortgages have become the clear preference of customers. But the lowest rates are selectively reserved for the most creditworthy profiles, and very few companies are now willing to compete on price in providing secured mortgages, given the rising cost of money.

In a rising rate scenario, companies recognize that variable rate mortgages are now the most profitable option for banks if they want to make money from the business, just as fixed rate mortgages were years ago in a zero rate environment.