New Euribor cut to cut payments for thousands of mortgage holdersPixabay
The month that is about to end will be the fourth month in a row this year in which Euribor, the interest rate to which most floating-rate mortgages are subject, will experience a new reduction. Thus, The indicator is set to close July at 3.54%, a far cry from the 3.71% it added in February.. Then came a fall that brought the percentage back to values similar to those in February last year, when it was 3.53%.
This gradual decline will have a logical (and desirable) impact on the mortgage payments of thousands of Basque and Navarrese citizens. The change compared to last year is approximately 0.6 percentage points lower.This change from last year means that mortgage holders will notice a reduction in their mortgage payments if they check the interest they are paying based on July data.
This will mean that, according to mortgage comparator iAhorro, a customer who has, for example, taken out a floating mortgage of 150,000 euros for 30 years with a differential of 0.99% plus Euribor, will have to review their interest rate from July. Euribor, you will register a reduction in fees of around 50 euros per month. This is equivalent to just over 600 euros per year.In general, annual checks are the most common, but more and more financial institutions are also offering semi-annual checks.
Mortgage firm eases slump as Euribor falls
Statistics from the Basque Housing Observatory for 2023 estimated that between 2010 and 2022, more than 240,000 mortgages were signed in the CAV, a significant change from the more than 280,000 signed between 2003 and 2009. It is estimated that Around 120,000 Basques and 70,000 Navarrese have taken out floating mortgages linked to the Euriboralthough in recent years, as far as new ones are concerned, the fixed rate has again become widely present among offers and consignment contracts, thanks precisely to the sharp rise in Euribor in 2023, when it exceeded 4.1%. In fact, according to statistics from the Basque Housing Observatory, 90% of mortgages signed in 2016 were linked to the Euribor rate, which was then below 0%. On the other hand, in 2022, for example, only four out of ten were linked to this index, while the rest were linked to a fixed or mixed rate, with this modality also growing strongly.
In any case, the interest rates associated with fixed-rate mortgages, despite being products that offer the customer greater certainty as their payment will not fluctuate, have also increased in recent months as businesses realize that they are becoming an increasingly popular option. In this sense, andThe average interest rate at which Spanish companies issued mortgages in June was 3.71%.. According to the Bank of Spain, this is the lowest level since April 2023, when it was 3.683%, although this decline is largely due to the decline in Euribor. In fact, the average fixed rate signed in Spain in May 2024, according to INE, was 3.42%, very similar to the value a year earlier.
Scenario of the future
The future that could open up for the mortgage segment has contradictory characteristics. On the one hand, experts believe that the fall of Euribor and the possibility that the European Central Bank will undertake a new interest rate cut in September – now at 4.25% – opens up new opportunities for new customers to access better conditions in their home countries. mortgages, as the bank adjusts its offers, especially for fixed mortgages, and returns to the mortgage battle between entities that will open up the range of offers to users. However, for this scenario to finally turn into better options, it is also necessary for housing prices to become cheaper, which almost all analysts rule out in the short term, especially at a time when rents are putting pressure on growth.
In Euskadi, the average mortgage debt level increased moderately from 2019 to 2022, rising from €150,955 per mortgage to €163,493 in 2022, almost €16,000 more than the state average. According to registry statistics, mortgages issued in 2022 represented an average monthly payment in the Basque Country of €720, €49 higher than the national average. Likewise, the effort to repay a mortgage increased from 26% of the average salary in BAC in 2016 to 30% in 2022.
The report “Analysis of the Spanish Mortgage Market”, prepared by iAhorro and concerning data for the second quarter of this year, states that despite the fall in interest rates, “High house prices due to the lack of supply of homes for sale that meet demand in Spain means that the mortgage industry is not recovering.” Thus, according to INE, 27,435 mortgages were signed in the state in May, the lowest figure in 2024. From January to May 2023, 170,128 mortgages were signed, compared to 161,712 in the first five months of 2024.
Another interesting piece of information that the report reveals is that mortgages on new homes are cheaper than those on used homes. “People buying a newly built home generally get better terms on their loans than those buying a used home. The difference between one interest rate and another can be as much as half a point, which ultimately represents a big saving on the monthly payment,” it says. The latest mortgage data in both BAC and Navarre show a year-on-year decline, but less pronounced than in other territories. Thus, The number of mortgages signed fell in Euskadi by 2.4% in May compared to the same month in 2023, the smallest decline of all communities, while in Navarre the number of mortgages fell by 4.5% year-on-year..