The contracting of loans for the purchase of a home fell by 7.6% in 2020, the INE recently revealed. However, it also announced that creditor subrogation, which is an operation that allows change a bank mortgage to improve it, reached 14,717, 32% more.
It is worth wondering, therefore, why so many mortgages decided to transfer their credit to another entity in the midst of a pandemic. According to the financial comparator HelpMyCash.com, the reason is threefold: due to the greater offer, due to the current low interest scenario and due to a regulatory change.
Market
A solution to the lower demand for mortgages
One of the reasons why these subrogations grew was that more banks offered to take on mortgages from other entities. And it is that the pandemic caused a fall in the demand for financing to buy houses, so that the entities had to look for other ways to grant mortgage credit to earn money.
The solution that many entities found was to try to attract the mortgaged unhappy with their bank, to whom they offered to assume their loan in exchange for improving conditions. This is demonstrated by the INE data: between March, when the pandemic broke out, and December 2020, 12,805 creditor subrogations were formalized, 46.44% more than in the same period of the previous year.
Offer of mortgages in a bank
From the second quarter of 2020 onwards, many banks advertised offers to capture mortgages from other entities: Bankia, Kutxabank, Cajasur, MyInvestor … To this day, the vast majority are still in force, according to HelpMyCash. For example, Bankia’s subrogation proposal It allows to lower the interest of the mortgage of another bank to obtain a variable rate from Euribor plus 0.99% or a fixed one from 1.85%, always in exchange for direct debit of the payroll.
Terms
Possibility of lowering the interest rate
In order to attract clients from other banks, they had an asset: the low interest rates on mortgages in 2020. It should be noted that those who financed the purchase of a home between 2010 and 2017 had, in general, a significantly higher interest (Euribor was higher and the flat rates were also higher). Therefore, there was a significant demand from mortgages interested in changing entities to lower the price of their credit.
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This demand, in fact, is still high today. And according to HelpMyCash.com calculations, those who got mortgaged between 2010 and 2017 can still save a lot of money by switching their bank mortgage. For example, a client with an outstanding loan of 150,000 euros, signed in January 2017 with an original term of 25 years and an interest of 2.50%, could save more than 25,000 euros on average in the long run with a subrogation.
A person holds keys to a real estate development
From this comparator they recognize, however, that the savings that can be obtained depend on several factors, such as the conditions of the original mortgage, the improvement offered by the new entity or the cost of the operation (although this does not usually exceed 1,000 euros) .
Therefore, they have developed a free surrogacy calculator With which you can know how much you would stop paying if a specific mortgage loan were transferred from one bank to another.
Legislation
A regulatory change that also matters
The third reason that encouraged banks to offer more subrogations is the regulatory change that came into effect on June 16, 2019, when Law 5/2019 on real estate credit contracts began to be applied.
Until then, the original bank could retain its client if it improved or matched the offer of the new entity, something that happened often. However, the aforementioned regulations eliminated the right of first refusal in these operations, which also contributed to the increase in bank changes.
A woman sunbathes in her home during confinement
All the reasons that led banks to acquire mortgages from other entities are still valid in 2021: banks still need to increase the granting of mortgage credit, interests are much lower than a few years ago and the legal change is still in force.
Therefore, from HelpMyCash.com they consider that it is very likely that the rate of completed subrogations will remain stable or even increase during this year. In the longer term, however, it will be necessary to see how the mortgage market evolves to know if this operation will continue to be in demand.
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