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The fixed mortgage, a new hope for Spanish banks

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Mortgages have once again become the star product of banks. With a property market in full growth, and a climate of pseudo euphoria, the financial sector has wanted to bring the water to their mill and improve their offers.

Since 2011, in the midst of the crisis, the new owners who needed mortgages, given the situation experienced and the fluctuation of the Euribor between 2006 and 20011, have been moving closer to fixed rate mortgages, and today, represent 40.2% of the total. In just one year, the percentage has grown by 4%, according to the latest data published by the Bank of Spain (BdE). The future rise in interest rates and the staggered growth of the Euribor -a benchmark indicator for most mortgages- leads us to believe that the most profitable alternative is to borrow at a fixed rate.

Discounts on variable rate mortgages seem to have peaked with the change in trend of the Euribor and will now, it is believed, have an impact on mortgage lending. In fact

The average interest rate for variable rate mortgages is 2.3%, while the rate for fixed mortgages is 3.12%. Although they are higher rates, banks move to offer competitive prices.

The terms are varied in this case: you can apply from 14 years to 30 years and interest rates will vary depending on the term you choose.

Banks prefer fixed-interest mortgages to avoid problems, but I doubt that the mortgagee will be interested at the moment, as the annual Euribor increases are very small, 1 euro, or 2 per month, and also the new Mortgage Law will provide for a higher repayment commission for early repayment in the case of fixed rate contracts than in the variable rate, in order to give more stability to the financial system.

The presentation of the Mortgage Law, which is expected to finish its work on Tuesday in the Economy Committee of Congress, will include a commission for early repayment that will protect banks against the higher cost they have to assume when constituting a mortgage at fixed interest rate.

And is that in the case of mortgage contracts with fixed rates, the financial institution must guarantee the coverage of that interest (which is currently higher than the variable) as well as long-term financing.

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