The interest rate on mortgages in Spain has risen at a dizzying speed since the beginning of 2022, which has caused the increase in the cost of loans for the purchase of a home, especially for those who have a mortgage at a variable interest rate.
Variable mortgages (1 out of 3 of those that are contracted) update the installment that the debtor must pay every 6 or 12 months following a reference index, which is usually the Euribor. If the Euribor rises, the fee becomes more expensive, and vice versa.
Since January, the Euribor has gone from being negative (-0.477%) to rising to 0.852%, which it marked in June. And everything indicates that in July it will be higher. In this sense, families who have updated their mortgage in recent months will have suffered an increase in their monthly payment, and those who update the figure in the coming months will be even more affected.
But how much more will I have to pay?
The Bank of Spain has a calculator to find out how a variable-rate mortgage changes if the Euribor rises (or falls). In you can find it and this is how it works:
Enter in Initial capital the amount of the loan that you have left to pay. In Interest rate, the new one that you will have after updating the loan (if it is updated in the coming months, there is no way of knowing where the Euribor will be then). And in Amortization period, the years or months that you have left to pay.
Press Calculate and on the right you will have the installment that you will have to pay from now on so that you can compare it with the current one.
When is my mortgage interest updated?
To find out when the Euribor increase will be reflected in your loan, check your mortgage deed. There are collected the conditions of the loan, the date (annual or semi-annual) on which your mortgage is updated following the Euribor, and the reference month of the update.
The most common thing is that, if it changes in August, the average Euribor that has been registered in July is taken as a reference.
What is a fixed and a variable mortgage?
-The fixed rate is one that does not change throughout the life of the loan. If you sign 2%, each year you will pay 2% of the capital that you have left to return, regardless of how the economy evolves.
-The variable rate is one in which the commission (interest) varies from time to time. Normally it changes once a year, and goes up or down depending on what the Euribor marks. The variable interest has two parts: a fixed percentage and a variable one (the Euribor). If you have a loan at 1% + Euribor, each year you will pay the sum of that amount as a commission.
-The mixed type combines the previous two and there are all kinds. The most common is that you agree on a fixed rate, and after 5 or 10 years you start paying interest at a variable rate, or vice versa
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