MALAGA HOUSING | The fall in Euribor reduces mortgage payments from 120 to 240 euros per month.

De-escalation of the Euribor rate following the recent interest rate cut by the US Bank. European Central Bank (ECB) This is starting to bring a lot of relief to the pockets of those families who once purchased a home with a variable mortgage. Holders who completed the Euribor survey last October, which closed at an average of 2.69%, will now register. monthly fee is reduced which will fluctuate on average, depending on the loan amount, from 120 to 240 euros (or, what is the same, from 1440 to 2880 per year) in relation to what they have been paying so far.

The Euribor index abandoned two and a half years ago, in April 2022, from the negative indices in which it had been moving for a decade and began to grow. a breakneck rise that saw it reach a peak of 4.16% in October 2023 (a year ago).. Since then, a gradual decline has begun, which has accelerated since last summer, when the ECB approved three rate cuts at its meetings in June, September and now October (the price of money fell by 0.25% in each case). Euribor has been declining for seven months and is at its lowest level in two years.

Thus, the renegotiation portions of variable mortgages begin to decrease. quantity. Carrying out the calculations, we see that in the case of an average loan of 150,000 euros with a term of 25 years plus Euribor and a differential of 1%, the commission will now jump after the October review from approximately 890 euros to 770, with a drop of 120 euros per month or, what is the same, by 1440 per year.

The 12-month Euribor is the main indicator that includes adjustable rate mortgage in Spain. However, it should be noted that in those adjustable rate mortgages signed several years ago (eg, before 2010), a significant portion of the outstanding capital has already been amortized, so the reductions in this case will be lower on average. . The French amortization system (most used for mortgages in Spain) includes most of the interest paid in the early years of the loan term.

On the other hand, the reduction will naturally be more intense for those mortgages with higher amounts. For example, based on the above conditions, the monthly mortgage payment of €200,000 would be reduced from the current €1,188 to €1,026, representing a saving of €162 per month and almost €1,950 per year. And for those with a loan of €300,000, after the review in October 2024, the amortization fee will drop from €1,780 per month to 1,540, a reduction of around €240 per month and around €2,900 per year.

“If this trend continues, October and November will be the periods of maximum quota reduction. to such an extent that in those months, last year, we continued to use Euribor at 4%,” explains the financial user association Asufin. Analysts also believe Euribor will fall some more in the coming months, although this depends on expectations of another ECB rate cut in December or in the first quarter of 2025, according to Mikel Riera of financial comparator Helpmycash.

Market reactivation

Another consequence of the de-escalation of rates and Euribor is that underwriting mortgages and selling houses seems reactivateafter 2023 and the first half of 2024, which was a year of clear containment.

“Although everything was pointing to 2024 being a year of stability, and this was the case during the first semester, the summer has been a turning point and we are already starting to see a significant improvement in both Spanish mortgage take-up rates and buying and selling houses in Spain,” says mortgage comparator iAhorro.

In Malaga, for example, the latest data National Institute of Statistics (INE), which cover the period up to August, reflect that in the first eight months of the year there were 22,919 home sales and 12,354 mortgages issued, both down just 5.1% compared to the same period the previous year. It should be remembered that in the first half of 2024 the year-on-year decline was between 10% and 20%.

INE data also shows that around half of house purchases in Malaga (46%) are made without the use of a mortgage, demonstrating the heavy weight of powerful clients in the market, many of whom are investors. foreigners who do not require financing to purchase a home. However, the majority of purchases (54%) are made using a mortgage.

What doesn’t show a decline is the average amount of mortgages signed. On the contrary, the amount continues to grow. In the province, the average mortgage cumulatively for the year is €196,300, up 13.3% from the previous year (173,100) and also the high of the property boom (it was 165,000 in 2007). According to the Association of Economists of Malaga, huge demand for housing and low supply are contributing to this escalation. The mortgage usually covers up to 80% of the cost of the home.

Expectations

Real estate portals believe that the transaction growth trend is starting to stabilize with the period mortgage “gold mine”therefore, they predict that the number of transactions will increase. According to Idealista CEO Juan Villena, this recovery is expected to continue in the coming months as the trend of lower rates and “more aggressiveness” of banks will lead to “cheaper” mortgages.

Fotocasa, through its Research Director, adds: Maria Matos, that as the mortgage cycle changes, a “dynamism phase” in home buying begins.

Research Director at Pisos.com Ferran Font, indicates that he expects the coming months to see a rebound in transactions thanks to moderating rates and “very strong” demand, although he warns that mortgages with better terms and new regulation, as well as “very strong” demand, will lead to supply shortages further price increases.

For my part, General Council School Agents of Industrial Property of Spain (COAPI) I agree that the trend change is consolidated. “The time for changing mortgage terms has already passed. “People have done their homework, adapting to ECB economic policies and Euribor fluctuations,” COAPI comments.

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