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The statistics don’t lie: the appetite for fixed versus variable mortgages has increased. Something that seemed unthinkable not long ago, when taking out a fixed-rate mortgage was an exception to the rule.
However, the contracting of fixed-rate mortgages is skyrocketing. From 2015 until now, there has been unprecedented growth. In that year, fixed-rate mortgages were only 5% of the total. In the first half of 2021, they already account for 80%.
“In two years, fixed rate mortgages have doubled their market share in our country ”, according to the ‘XXXIII Report on the housing market’ prepared by Tecnocasa and the Pompeu Fabra University. In contrast, the variables have deflated like a punctured balloon: they have gone from 80% to 15%. The mixed ones are at 5%.
The upward trend of fixed rate mortgages is increasing daily. “Users opt for the stability offered by a fixed rate and the historical rate that precedes us in interest rates,” says Lídia Subirà, key account manager and head of the Trioteca study center.
The representative of the digital platform that accompanies the user throughout the mortgage journey, and that integrates the mortgage offer of 37 banks, adds: “91% of our users who signed their mortgage in June have opted for fixed mortgages to take advantage of the current environment of fixed rates that are at historical lows ”.
So much ride, ride so much
Those record lows are one of the reasons for this mortgage rollover. Currently, and according to the association of financial users Asufin, both fixed and variable bonded mortgages already have an “equivalent” APR price. Namely: 2.37% for fixed; 2.35%, for the variables.
Fixed-interest subsidized loans, that is, those that include the contracting of other products and the customer’s relationship with the entity, have fallen from 2.73% to 2.37%.
Evolution of the types of mortgages. Source: Fotocasa.
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While las Non-subsidized mortgages offered at variable interest reflect an average APR of 2.66% in July 2021. A year ago it was from 2,64%. The interest of the subsidized, for his part, it has gone from 2.09% to 2.35%.
Asufin gives the example of a 150,000 euro 25-year mortgage to explain the transfer to fixed mortgages. For a fixed mortgage, you would pay a monthly fee of 663.15 euros; with a variable, it would be 661,65 euros. The difference is only € 1.50 per month or € 18 per year.
Sthorn Tecnocasa, there have been times when a fixed-rate mortgage meant paying a hundred euros more per month versus a variable.
Other data: according to the Spanish Mortgage Association (AHE), the average rate of fixed loans, with a maturity of more than ten years, stood at 1.45% in April. The average rate of variable loans, at 1.40%.
A journey that has been happening gradually since the Euribor fell into negative territory. Since then, financial institutions have increased the commercialization of fixed-rate mortgages. The reasons are clear: income is more guaranteed, while eliminating market risk. This is how they ensure their margins.
Powerful attractions
Having seen the interest of financial institutions to market fixed mortgages versus variable mortgages, the question that arises is which mortgage is now more interesting for the new buyer.
“Currently, the average annual rate for fixed or variable rate mortgages has converged around 1.6%. So clearly the data suggest that for new mortgages the fixed rate is more interesting, as they are not subject to the uncertainty of future increases in the Euribor in the medium or long term ”, suggest from Tecnocasa.
Average interest applied. Source: Fotocasa.
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Lor what is clear is that the user is in a scenario in which he has the opportunity to sign a very low interest rate for the entire term of your mortgage. “For many families, knowing well the monthly expenses and the stability in the installment of their mortgage with a fixed rate is essential”, says Lídia Subirà.
Hay Keep in mind that the most common term of a mortgage in Spain is around three decades. Signing now, downwards, is synonymous with peace of mind in the face of the instability of what can happen with a variable interest rate.
But, beyond the interest rate, another series of variables must be taken into account in order to opt for one or the other option. Variables ranging from the age of the people who request it, the socioeconomic situation they are going through, their aversion or tolerance to risk, and the time they estimate they will need to fulfill the signed commitment.
Uncertainty or tranquility
Attending a study of ING, the variable mortgage carries with it a relative degree of uncertainty. And that can be translated into good news (that it goes down) or bad news (that it goes up). It is the youngest who choose it because, in his ideology, is to grow professionally.
That way, if the quota goes up, they can cope with it. It is also the favorite for those who sign for periods of less than ten years. In their favor they have that the Euribor (which is over -0.5%) is not going to move in the short term.
Regarding the fixed mortgage, It is more suitable for those whose economic situation will not change in the future. Conservative profiles who prefer to live more calmly without being altered by possible fluctuations in the amount to be paid. Also for those others who sign over the age of 20.
Fixed and variable monthly fee. Source: Fotocasa.
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“In general, the profiles in fixed mortgages are more conservative than users of variable mortgages, since they are people who want to repay the mortgage on a recurring basis,” says Lídia Subirà.
And he clarifies: “Something important to note is that the profiles that end up formalizing a variable rate mortgage what they are looking for is make partial amortizations annually and pay off the loan before maturity. This happens because the banking entities have a more advantageous policy in variable rates for amortizations ”.
According to the INE (National Institute of Statistics), the number of mortgages constituted shot up 37.4% in May over the same month in 2020. We are talking about 35,225 loans. This continues an upward trend that began in March after five consecutive months of declines.
The average amount was 133,611 euros. The capital loaned, for its part, increased by 44.8% to 4,706 million euros. The average interest rate for all mortgage loans was 2.5%, with an average term of 24 years. In the case of dwellings, it was 2.31%, with a term of 25 years. 39.9% of the mortgages were at a fixed rate; 60.1%, variable.
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