The mortgage market began to change in April 2022 when the Euribor, the index to which most variable mortgages in Spain are linked, turned positive for the first time in six years. The change became even more pronounced in July, when the European Central Bank raised interest rates for the first time in 11 years. So In less than two years, mortgage prices have risen. But at the moment, variable is still cheaper than fixed, despite the fact that Euribor is 4%.

Data from the National Institute of Statistics (INE) shows that in September, variable mortgages were 10% cheaper than fixed mortgages at the time of their inception. Thus, the average initial interest rate for the average mortgage was 3.40%, compared to 3.09% for the variable. This difference in favor of variables is mainly due to the fact that rising Euribor rates make fixed rates more expensive, making others more attractive for higher interest payments.

This difference makes 43.8% of residential mortgage loans were issued in September last year with an adjustable rate. while 56.2% were subscribed at a fixed rate, the lowest percentage since March 2021.

However, in recent months this difference has been narrowing. It should be taken into account that the INE data relates to September, and in August Euribor recorded its first decline in two years, but still remained above 4%. In September, the index rose again. Although in April and May 2022, when the Euribor rate was changed to positive, variable mortgages were more expensive than fixed mortgages.

Traditionally, when the Euribor rate is positive, those with a fixed rate mortgage pay the more expensive mortgage but with the peace of mind of knowing how much they are going to pay each month. Those with a variable rate mortgage must review their loan once every 12 months. At the time of this review, if Euribor increases, their payout will increase; if it decreases, the amount payable will decrease. This was one of the problems last year because 70% of the outstanding mortgage balance is variable and many have seen their fees rise by €200 a month.

The increase in this fee depends on the year in which the mortgage was concluded. For example, CaixaBank estimated that its clients’ mortgages rose by an average of about 90 euros per month, that is, just over 1,000 euros per year, so it departs from the reported increase by more than 200 euros, although its CEO Gonzalo Gortazar explained that There will be clients who would be able to collect this money, but they do not make up the majority.

The problem this time is that The Euribor rate has increased very strongly: from negative to more than 4%. This November, with two days left until closing, there will be a second Euribor rate cut in just under two years. This reduction could provide relief to those with mortgages, but the index would still be above 4%. Forecasts show that in 2024 the Euribor rate will fall to 3.5%.

Overall, mortgage costs have risen 85% since Euribor turned positive in April 2022. The average interest rate in September was 3.26%., the highest since February 2016, with an average duration of 24 years. Compared to a year earlier, the average interest rate on mortgage loans increased by 1.26 points. The interest rate has exceeded 3% for the sixth month in a row.

The number of mortgages issued on homes fell 29.6% in September last year compared with the same month in 2022. before adding 31,054 credits. With September’s year-over-year decline the most noticeable since January 2021, the mortgage lender had eight months of negative rates, although they were higher in September than in August (-22.7%).