Should I take out a fixed or variable mortgage in Spain?
The first thing that every client must be very clear about is that despite the fact that most of mortgages in Spain are with a French amortization system or a constant instalment, this does not mean that the instalment remains constant for 30 or 40 years of the term. If you take out a fixed-rate mortgage loan, we can be sure that every month, until the end, we will pay the same fee. Experts do not agree on whether it is better to ask for a fixed or variable rate mortgage, since it depends on the profile of the mortgaged future, on the one hand, on the offer of fixed and variable mortgages at all times and on economic and financial factors various (evolution of interest rates, among others). Fill in the following contact form if you want a real estate credit broker selected by our mortgage portal to analyse whether a fixed or variable mortgage is convenient for you:
Pau A. Monserrat, CEO of Futur Finances, bets on the fixed rate as long as the nominal rate is below 2% -3% in 2020.
In August 2019, with the Euribor back on a downward path in a scenario of negative rates, it was even possible to find fixed-rate mortgages at 2%, as explained in the “El Confidencial” news article titled ‘Banking redoubles its commitment to the rate fixed before the collapse of the Euribor’ in which our economist thinks. In a story in Expansion about fixed-rate mortgages for after the summer, our CEO participates again commenting that against the odds, 2019 is going to be a better year to request a fixed-rate mortgage than 2018: in the news titled ‘ The bank heats up the market for a mortgage war in September ‘fixed loans at nominal rates below 2% are mentioned.
2020 looks like it will also be a good year to take out a fixed-rate mortgage, although there are some data that reinforce the idea that banks will gradually start to make this type of mortgage more expensive.
FIXED AND VARIABLE MORTGAGES IN THE MEDIA
Some opinions expressed by the CEO of Futur Finances in the media related to mortgages and interest rates are:
- The Euribor marks all-time low in August. The Confidential of 08/31/2019.
- ¿Las hipotecas a tipo fijo son un error o un chollo? 20 Minutos de 30/08/2019.
FIXED-TYPE AND VARIABLE-TYPE MORTGAGES
A fixed-rate mortgage is not suitable for any profile of clients, since a mortgage adviser must first study the profile of clients and their financial needs and objectives. There are clients for whom a variable rate suits them better than a fixed rate, due to their income, savings capacity and financial training.
However, most mortgages that are signed in our country are at variable interest. This means that in each period of interest rate revision the instalment is constant, but when the interest varies, the monthly payment changes. The important thing is to know what variable interest rate is applied to us, which is calculated as follows:
Variable interest = reference + differential
The benchmark is the mortgage market index that applies to us, be it the Euribor or the IRPH of entities The bank adds a differential to this index, which varies from 0 to what the bank estimates. The most important thing is that we analyse the graph of how the index evolves over the years, to get an idea of how much the quota can rise or fall.
The ideal for a family would be to take out a fixed-rate mortgage, since they would know their mortgage payments month by month. However, most are signed at a variable rate. The reason? That banks prefer that the exchange rate risk be assumed by their clients. And therefore they offer little offer of fixed mortgage loans, with stricter grant requirements and very high interest rates.
In practice, it is often more competitive to risk interest increases in exchange for variable mortgages, which, in principle, offer future interest rate scenarios that are lower on average than their fixed-rate competitors.
In any case, it is always recommended to find out the maximum interest that the reference index reached, add the differential and calculate the fee. This would be the highest monthly payment that, in principle, we could have to pay. If with our income we could not pay it, it is advisable not to embark on this mortgage and look for a cheaper house.
Fixed or variable rate mortgage?
It depends on the conditions that the bank offers us. In 2020, banks offer competitive fixed-rate mortgages that must be analysed, depending on the risk profile of the mortgaged. In addition to the interest rate, you must take into account the linked products, which are used too frequently to increase the final cost of the mortgage at a fixed or variable rate. The bonuses for contracted products are not usually bonuses, but penalties: in reality it is cheaper not to link, no matter how much the applied interest rises.