Euribor four years in negative
Breaking all records. So we could summarize the last four years of the Euribor. The main indicator of variable mortgages was dyed red for the first time in February 2016. At that time it registered -0.008%. A data very close to zero, which did not presage that the negative terrain would be a habitat for at least 4 more years.
“The truth is that nobody expected the Euribor to mark negative figures for such a long period of time. Another issue is that, given the figures for the past few months, experts in the financial sector anticipated that it would be a fairly long negative journey. And we believe that at least this year will continue the same negative trend, ”says Ruth Armesto, director of Canal Digital Hipotecas.com.
Specifically, this February the Euribor will close at -0.286% (in the absence of confirming the last two data of the month). This figure means a new fall after five months of rise (September, October, November, December and January). Specifically, this index of variable mortgages is 0.033% lower this month than in January 2020. If we compare the data with that recorded in February 2019, the indicator has fallen by 0.178%, since a year ago it was in -0.108%.
Are these Euribor figures normal?
“It is normal for it to remain that low, since last December the ECB maintained its commitment not to raise interest rates until the inflation target is reached. In addition, this decline occurs after the market has verified that the replacement of the former president of the European Central Bank (ECB), Mario Draghi by Christine Lagarde has not modified the institution’s policy, ”explains the director Digital Channel Hipotecas.com .
Simone Colombelli, director of Mortgages at iAhorro.com, points out that the current economic context must be added to the ECB’s decisions: “All reports point to a break in real estate and a recession. To this have been added the falls of the stock market and the effect of the coronavirus in many countries. This scenario favors that the Euribor continues in negative territory at least in the rest of the year ”.
Savings of up to 400 euros in four years
Citizens who had a variable mortgage before 2016 have benefited from substantial savings in these four years in their mortgages. For example, in the case of mortgage loans of 150,000 euros at 30 years with a differential of Euribor + 0.99% they have seen how their installments went from being in 2016 from 479.77 euros per month to the current 462.34 euros per month. A saving of 17.43 euros per month which translates into 209.16 euros in the four.
The biggest savings in installments have occurred this 2020. Those mortgaged (following the previous example) will pay the next 12 months 462.34 euros of payment compared to the 473.99 euros they have paid last year. This means an annual saving of 139.8 euros. If we add to this amount the difference in the payment of fees for the next three years, we will save 209.16 euros.
The savings are most noticeable in mortgages of higher amounts. Thus, in the case of a loan of 300,000 euros for 30 years at Euribor + 0.99%, the mortgaged will have noticed savings of up to 418.56 euros in four years. In that case, the fees have gone from 959.55 euros in 2016 to 924.67 euros that will be paid in the coming months with the new Euribor data.
What is the future of the Euribor?
In these four years, the Euribor has shown experts that it is very sensitive to the decisions of the ECB and the international economic context. Taking these data into account, the director Digital Channel Hipotecas.com believes that this index will remain at these levels as long as the inflation and growth prospects do not change significantly. “In the absence of changes in the economic scenario, we think it is most likely to remain negative throughout the year,” says Ruth Armesto.
For his part, Simone Colombelli believes that the main indicator of variable mortgages will continue to fall in the coming months, “it is possible that he will give us the occasional historical record motivated by the economic context. This news is very good for people who are currently mortgaged, as they will see how their fees continue to fall. ”
In the long term, both experts are cautious when specifying a fact. Both Armesto and Colombelli agree that it is possible that between 2021 and 2022 it will start to increase a bit. Although the data will remain very close to zero.
If I am looking for a mortgage now, better fixed or variable?
Fixed mortgages at historical lows vs one Euribor at historical lows. The question does not seem simple, what type of mortgage is more interesting at this time? “It is true that the Euribor data could lead to the contracting of mortgages at a variable rate. However, I believe that the entities must accompany the client in what he may need now and in the future, ”explains Ruth Armesto. In addition, it recommends customers to make a responsible purchase always relying on good service. And “not only focusing on the current low prices but taking into account all the possibilities of the market.”
For its part, Simone Colombelli highlights that fixed mortgages around 1.35% can already be found without any combination. Something that until now was unthinkable. “Fixed mortgages have very good offers that are attracting many customers.”
The Mortgage Director of iahorro.com, remember that the mortgage trend in recent months has changed. “The trend in favor of fixed mortgages changed a few months ago and has been maintained. Just five years ago, 85% -90% of the mortgages that were contracted were variable. Now they represent 55% -60%. This has happened for two reasons, the first is that banks maintain their commitment to these types of loans with very good offers, even with aggressive offers. On the other hand, clients are increasingly asking for fixed mortgages rather than variables because they seek peace of mind. They know that at some point the Euribor will rise again. ”
And what happens to people who consider subrogating the mortgage?
Colombelli believes that this situation is also very interesting for citizens who are thinking about subrogating their mortgage loan. “There are citizens who have mortgages with variable rates of 2% -3%. Now they could consider switching to a fixed mortgage that gives them peace of mind and even a cheaper rate. ”
Whether fixed, variable or mixed, both mortgage experts remind users that the choice of a mortgage loan should be personal so that it fits as closely as possible to the financial profile of the applicant. “I think it is time for financial institutions to take a step forward and propose customized products according to the needs of customers and not so much in a format of only fixed, mixed or variable interest rate”