The fall of the Euribor forces banks to reduce their mortgages to fixed and mixed rates

The European Central Bank (ECB) decided in its penultimate meeting of the year to pause the increase in interest rates. Thus, the organization led by Christine Lagarde left the price of money in the eurozone unchanged at 4.5%, its highest level since 2018. This has caused a chain reaction in the Euribor, the index to which most refer. of mortgages, which has gone from breaking 4.10% to recording the largest month-on-month drop since 2012. This, together with a slowdown in the pace of credit, has led banks to lower the price of their mortgages both at fixed rates as mixed.

In fact, sources from the financial sector assure that “if the Euribor starts to fall, it is likely that more banks will dare to reduce the interest on their fixed and mixed mortgages.” However, the ball is still in the ECB’s court: if the outlook is for rates to fall in the short term, entities will make these products cheaper, while if they are expected to remain stagnant in the medium term, it is likely that it will take longer for this to occur. Price’s drop.

Among the banks that have cut the price of their mortgages, Banco Santander was one of the first. The entity chaired by Ana Botín has significantly lowered its loan to purchase a home this November, placing the nominal interest rate on its fixed-rate credit at 2.90% for the first six months, before falling to 2.80. % from September month. Before, it stood at 3.89%, recalls Miquel Riera, mortgage expert at HelpMyCash. The APR (equivalent annual rate) remains at 3.39%, which makes it one of the cheapest fixed rate loans at the moment. For her part, Estefanía González, personal finance expert at Kelisto, remembers that to date “we have only seen increases.”

Experts point out that fixed mortgages are still being seen below 3% for future mortgagees who have a good profile, and mixed ones whose initial fixed period is between 2 and 2.5% NIR. Looking ahead to the remainder of the year, they believe that most banks will continue along this line and, if any raise their rates, it will be with an eye on 2024.

Banco Sabadell has also continued down this path and this month made its loans to purchase a home cheaper in its three modalities (fixed, mixed and variable) after having done so in October. Thus, at a fixed rate, the subsidized interest (which to achieve is necessary to domiciliate life insurance, home insurance, payroll and take out payment protection insurance) has gone from 3.55% to 3.40%, although the APR will be at 3.99%. The initial rate was 3.95%. At a mixed rate, it has cut the differential over the Euribor (applicable from the fourth year) from 0.85% to 0.65% and for variable loans, the reduction in the differential has been 15 basis points, going from 0 .65% to 0.50%.

Likewise, HelpMyCash experts have also detected Caixabank’s declines in its fixed-rate loans, the TIN has gone, in fixed-rate mortgages, from 3.85% to 3.55%. ING has also opted to apply discounts on its mixed-rate mortgages and for the first 20 years it has fallen from 3.75% to 3.55%. At the beginning of October, when it was already clear that the ECB would stop rate increases, it was EVO Banco that reduced the initial fixed rate of its mixed mortgage when it is applied during the first 15 years: from 3.20% to 2.95 %.

Despite these movements, we will surely have to wait some time for widespread falls to occur, because banks will want to wait a few months to see where things are going. In addition, entities usually make their mortgages more expensive at the beginning of the year, which could also delay these rate reductions.

Fall in credit volume also puts downward pressure

To understand these movements you have to understand what the starting point was. Since interest rates began to rise in July 2022, the price of new mortgages has gone from 2.21% to 3.78%, which has represented an increase of 71% in almost the last year and a half. Even so, the prices of the new operations are below the European average in line with the interest rate on the Spanish ten-year bond, which stands at 3.44%.

Sources from the sector explain that the banks maintain tough competition among themselves not only because of the rise in the Euribor, which has caused a decrease in the rate of granting new loans, but also because the outstanding mortgage balance is collapsing, now standing at below 500,000 euros, mainly due to the increase in depreciation.