Since February 2016, the Euribor has always shown negative rates, with a record low of -0.504% in January 2021. However, from January 2022 the index began an unstoppable rise with six months of consecutive increases, in the month of June.
In just one year, in which it has gone from -0.484% (June 2021) to 0.852% (June 2022), the cost of a mortgage with an outstanding capital of 100,000 euros has increased by 708 euros per year.
This fact is one of the reasons why they have gone from accounting for 10% of new purchases in 2016 to 70% today, according to INE data. But is this hiring the smartest? Is it no longer advisable to take out a variable rate mortgage?
“In this scenario it is very difficult to make forecasts. The priority of the European Central Bank at the moment is to try to tackle inflation, so it is realistic to think that rates will continue to rise. But since it is also a matter of avoiding an economic slowdown, it is It is foreseeable that the rise will be rapid, but not very intense”, considers the Organization of Consumers and Users (OCU), who estimates that “the Euribor could be around 2% in the medium term”.
In this situation of uncertainty, the organization has proposed three possible scenarios, comparing some of the best products, both fixed and variable, to find out which option between fixed rate or variable rate is most recommended for each case. To carry out the calculation, OCU has taken Pibank’s variable mortgage (with a rate of 0.98% the first year, revisable to Euribor + 0.78%) as a reference, compared to Open Bank’s fixed mortgage (with a rate of 2.02%, direct debit of payroll and home insurance) for a term of 15 years and a capital of 100,000 euros.
scenario one
– A first phase of the Euribor rising to 1.5% in 2023, reaching 2% in 2024 and remaining stable at around 2% for the rest of the life of the loan.
Recommendation: in this case, the fixed loan is clearly more favourable, with a saving of 4,232 euros compared to the variable.
scenario two
– Rapid rises in the Euribor to tackle inflation, already reaching 2.5% in 2023. Between 2024 and 2028, a second phase of progressive cuts (0.5 points per year) with the aim of tackling the possible slowdown in the European economies and avoid recession, reaching a minimum of 0.5% in the years 2027 and 2028. Afterwards, a four-year stable scenario with the Euribor around 1% followed by a progressive rise to around 2%.
Recommendation: in this situation there are hardly any differences between the fixed and the variable loan.
scenario three
– Again, a rapid initial rise to 2.5% in 2023. Subsequently, we propose a scenario of recession and a more intense drop in interest rates as of 2024, reaching a minimum of 0.5% between 2026 and 2028, to pass to a normalization scenario, with a progressive rise until reaching 2%.
Recommendation: here the variable loan would be the most favorable option, since 1,296 euros less would be paid.
“In an operation as long-term as a mortgage, with maturities of 20 years or more, it is better to be prudent and not rush. Short-term decisions should not be made based on an extraordinary and probably temporary situation such as the invasion of Ukraine and the uncontrolled inflation that it is causing,” warns the organization.