How to choose a mortgage when Euribor rates are falling: mixed, the most attractive | Financial markets

This year is more favorable than the previous one for those wishing to get a mortgage. The peak of rising interest rates – and the Euribor that made mortgage payments so expensive – is behind us, and lower money prices await us. The annual Euribor rate, an important benchmark against which the cost of variable-rate mortgages is linked, is already anticipating this fall and…

This year is more favorable than the previous one for those wishing to get a mortgage. The peak of rising interest rates – and the Euribor that made mortgage payments so expensive – is behind us, and lower money prices await us. The annual Euribor rate, an important benchmark by which the cost of adjustable-rate mortgages is linked, is already anticipating this fall and stood at 3.609% in January, the third monthly decline in a row. There will be relief for those who are already paying an adjustable-rate mortgage, and the cost of the loan will become somewhat cheaper for those who have to ask the bank for money to buy a house.

Faced with the prospect of a falling Euribor, the client will be faced with the dilemma of choosing between a fixed rate mortgage, with which he will be confident that he will always pay the same monthly payment, or an adjustable rate mortgage. – in which the commission will vary depending on the Euribor or mixed mortgage, which combines the initial part at a fixed rate of three to 10 years, and the rest at a variable interest rate. And this is where banking now offers better conditions.

In recent months, blended bonds have come back into use as a formula to make rate hikes more bearable. A fixed rate for the first years allows you to know with confidence what amount will be paid each month, regardless of market and rate fluctuations. And by the time the variable portion is activated, interest rates will have already fallen from current levels and are expected to be significantly lower. Also, currently a mixed mortgage would be the best of all worlds: a fixed portion with a lower interest rate than fixed-rate mortgages alone, and a variable portion with spreads that are the same or less than those of conventional adjustable-rate mortgages.

This is confirmed by Cesar Betanco, an analyst at mortgage comparator Hipoo: “The most attractive offer at the moment is a mixed mortgage, where you can find rates on the fixed part below 3% and differentials on the variable part in the range of 0.000. 45 and 0.8 points, which is similar to a pure variable mortgage.” In this type of mixed mortgage it is very important that the initial fixed rate is at least lower than Euribor, which is currently 3.6%, which will be more difficult when offering straight fixed rate loans. After all, The market expects the price of money to fall from the current 4% on the deposit line to 2.75% later this year. A sharp drop that will make entering into long-term fixed rates less attractive unless they are very competitive, and will make blended mortgages with a shorter portion of the fixed rate more suitable.

IN Iberkaya They admit that mixed mortgages, especially those with a fixed rate for the first ten years, accounted for 80% of new contracts in December. IN INGhis mortgage manager Alberto Gomez also notes that “the mixed option is the one that sells the most at the moment.”

The Aragonese enterprise has a 25-year mortgage with a fixed rate of 2.7% for the first ten years and Euribor plus 1.1 points for the rest of the time for related clients. That is, those who have a payroll and regular direct debit receipts, a credit card, home and life insurance, as well as regular contributions to an investment fund. At ING, for the example of a mixed mortgage of €150,000 with a term of 25 years, the fixed part for the first five years is 2.9%, and then Euribor plus 0.79. If the fixed rate period is 10 years, the interest rate increases slightly to 3.15%, and in the later part with a floating rate it increases to Euribor plus 0.79. IN UnicajaAt a similar level of coupling, the nominal rate in the first ten years of a mixed mortgage is 3%, and then Euribor plus 0.65.

According to financial sources, the mortgage market is currently in a period of transition, awaiting the first rate cut in the upcoming cut cycle. Meanwhile, the rise of mixed mortgages also leaves room for new formulas such as the Bankinter dual mortgage, in which the client chooses which part of the loan will be repaid at a fixed rate and which at a variable rate. “The client can balance this proportion through early repayments as he can decide whether to repay in the variable rate section or the fixed rate section. Additionally, as expected, they will always be depreciated on the section for which they pay the highest rate at any given time,” the company explains.

The power of negotiation

The offers that organizations advertise on their websites are a guide only, and the specific terms of the mortgage will be what the customer manages to negotiate with their bank, the better the higher their ability to pay and also if the amount they intend to borrow is high. … because this will bring the company more income from interest collection. “For €500,000, the client will certainly be able to choose a more attractive fixed rate,” says Betanco.

Antonio Gallardo, head of research at the Association of Financial Services Users (Asufin), agrees that offers below 3% can be found in the fixed part of mixed mortgages. “This 3% is a psychological level. The bank is trying to stimulate the market with mixed mortgages,” says Gallardo, who also warns that the moment of greatest competition will come with the first cut in interest rates. “Then we will see more competition in the fixed rate space, which could range from 2.5% to 3%,” he predicts. In fact, the financial sector acknowledges that there may currently be some pent-up demand among the most solvent clientele waiting to buy a home when interest rates fall, which could happen around the summer. It will then be time for banks to attract more solvent and more connected customers to the fixed rate, which can provide greater margins than the floating rate in the new context of lower money prices.

The big banks, which dominate much of the mortgage market, aren’t just getting into blended mortgages, a product that businesses are concentrating on as they more aggressively seek to attract new business. IN KaishaBank, a leader in mortgage lending, confirm that they support fixed rate as the best option for their customers. “Fixed-line communication is the most convenient offer for individuals due to its simplicity, transparency and protection from tariff increases. A variable mortgage does not reliably predict the family budget,” they explain. BBVA adds that “the majority of customers currently choose fixed-rate mortgages because, given the numbers and current fixed rate levels, they prefer to guarantee that monthly payment amount for the life of the mortgage.” “

CaixaBank has a 20-year fixed mortgage at a nominal rate of 3.2%, giving an annualized rate of 4.674%; after including expenses and taking as a basis the amount of 150,000 euros. These are the terms of a subsidized mortgage in which the client is linked to the business by direct debit of wages and receipts, home and life insurance and alarms from Securitas Direct. Otherwise, if there is no connection, the interest rate increases by one point.

Variable, steam

CaixaBank’s commitment to the fixed rate has been ongoing for a long time and has enabled clients to overcome the strong impact that the rise of Euribor has had on paying monthly payments. Customers with two-year variable rate mortgages factored in the increase in this fee into their annual loan review. The recent reduction in the Euribor rate has so far only slightly reduced the volume of mortgage loans subject to semi-annual review.

Convenience of obtaining a mortgage loan with a variable interest rate in the coming months, when the Euribor rate is expected to further decrease, This will depend on whether the bank survives this fall, maintaining the price of spreads.. For now, the best deals are concentrated in mixed mortgages, waiting to see if rate cuts will intensify fixed-rate competition.

The first rate cut could happen around the summer, as the ECB recently noted. Bankinter forecasts that Euribor could fall to 3.25% at the end of the year and to 2.75% in 2025. A decline that predicts a decline in the prices of all types of mortgages.

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