At the end of 2022, the Ministry of Economic Affairs and Digital Transformation approved Royal Decree Law 19/2022, which established a Code of Good Practices to alleviate the rise in interest rates on mortgage loans. In the text, it was specified that the rise in the Euribor could have a significant impact on the financial situation of families with variable rate mortgages, together with the increase in other costs of basic goods and services such as food or energy due to the « complex international context, marked by Russia’s military aggression against Ukraine.
Thus, this decree determined that all mortgage changes from variable to fixed made during the year 2023 would be subsidized. Or what is the same, it would be free, both in the case of a novation (modification of the clauses with the entity in which the mortgage is held) and of subrogation (it entails a change of financial entity and, in the majority of (on occasions, some modification in the conditions that existed with the previous entity).
This free payment expired in 2023. However, the Bank of Spain reports that the period to change the mortgage from a variable rate to a fixed rate or make a total or partial early amortization without paying commissions has been extended throughout 2024.
Furthermore, it clarifies that this rule now incorporates another novelty. Specifically, the exemption from commissions also extends to changes to mixed-rate mortgages with a first fixed tranche of at least three years.
Furthermore, if during the first three years of the life of the loan a creditor novation or subrogation is carried out, which implies the change from a variable rate to a fixed rate or with a first fixed tranche of at least three years, the compensation or commission for reimbursement or early amortization may not be greater than the financial loss that the entity may suffer, with a limit of 0.05 percent of the capital reimbursed early. If the novation does not imply early amortization of capital, no commission may be charged for this concept.
The Bank of Spain also informs that once the first three years of the life of the loan have elapsed, the entity will not be able to charge any compensation or commission in the event of novation of the applicable type or subrogation of a creditor in which the application is agreed, in going forward and for the rest of the life of the loan, with a fixed interest rate or with a fixed first tranche of at least 3 years.
Pros and cons of a fixed and variable mortgage
The main advantage of fixed mortgages is their stability. Since its interest does not depend on changing indices such as the Euribor, the client always pays the same installments. This type of loan may end up being cheaper than a variable loan if the Euribor remains high in the medium or long term.
The negative part: the interest required by current fixed mortgages is higher than that of current variable mortgages, so their payments will be more expensive in the near future. They can also be more expensive in the long run if the Euribor remains low in the medium or long term.
As for variable mortgages, their advantage is that in the short term, they have a lower interest rate than fixed short-term mortgages. That is, your first installments are cheaper. In the long run, they will cost more than fixed rates if the Euribor remains low in the medium or long term.
The great drawback of variable mortgages is that if the Euribor rises, their installments also become more expensive and can cost more than those of a fixed mortgage. For example, loans reviewed in October will become more expensive by an average of 180 euros per month. In fact, if this index remains high in the medium or long term, a variable mortgage will be more expensive than a fixed one.
2024-01-06 16:29:00
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