In recent years, banks have clearly opted to lower their fixed mortgages. Thanks to these reductions, in 2021 the lowest fixed interest rates in the history of Spain were signed, with rates of around 1%. And the strategy convinced customers: about 60% of mortgage loans signed last year were at a fixed rate, according to the National Institute of Statistics.
However, it seems that this commitment to “stable” mortgage loans is coming to an end. At least three entities have decided to lower their variable PHH mortgages and make their fixed-rate mortgage loans more expensive in the last week. A decision that coincides with the rise in the Euribor after the president of the European Central Bank, Christine Lagarde, dropped a possible rise in interest rates to control inflation.
BBVA, COINC, and Bankinter reorient their strategy towards variable mortgages
The three banks that have opted to reinforce their variable mortgages are BBVA, COINC, and Bankinter, with a very notable reduction in interest rates. This is how your loans would look:
- The interest of the BBVA Variable Mortgage before the change was 1.99% the first year and Euribor plus 0.99% the following. Now it is 0.99% the first year and Euribor plus 0.99% the following. It is discounted by one percentage point for direct debiting the payroll and taking out home and life insurance from the bank.
- The interest of the COINC Variable Mortgage before the change was 1.89% the first year and Euribor plus 0.89% the following. Now it is 1.50% the first year and Euribor plus 0.80% the following. You do not have to hire other products to get those types.
- The interest on the Bankinter Variable Mortgage before the change was 1.99% the first year and Euribor plus 0.99% the following. Now it is 1.25% the first year and Euribor plus 0.85% the following. It is discounted by 1.30 percentage points for opening a Bankinter account and taking out your life and home insurance and your pension plan.
Less attractive fixed mortgages
Those same entities, BBVA, COINC, and Bankinter, have also decided to raise the interest on their fixed mortgages:
- The interest on the BBVA Fixed Mortgage before the change was 1% if the term was up to 15 years, 1.20% if it was up to 20 years, 1.35% if it was up to 25 years, and 1.45% if it was up to 30 years. Now it is 1.35% for a term of up to 15 years, 1.40% for a term of up to 20 years, 1.45% for 25 years, and 1.50% for 30 years. These types are discounted by one percentage point for direct depositing the payroll and contracting the bank’s home and life insurance.
- The interest of the COINC Fixed Mortgage before the change was 1.25% at 10 or 15 years, 1.30% at 20 years, 1.35% at 25 years, and 1.40% at 30 years. Now it is 1.30% at 10 years, 1.35% at 15 years, 1.40% at 20 years, 1.45% at 25 years, and 1.50% at 30 years. You do not have to hire other products to get those types.
- The interest on the Bankinter Fixed Mortgage before the change was 1.25% for 10 or 15 years, 1.30% for 20 years, 1.35% for 25 years, and 1.45% for 30 years. Now it is 1.45% at 10 years, 1.50% at 15 years, 1.55% at 20 years, 1.60% at 25 years, and 1.65% at 30 years. These types are discounted by 1.30 percentage points for opening a Bankinter account and taking out their life and home insurance and their pension plan
Why do banks lower their variable rates and raise their fixed rates?
Until now, the banks’ bet has been to lower their fixed mortgages. The reason behind this strategy has to do with the Euribor, which had been trading at historic lows for five years and even negative. As variable mortgages are referenced to this indicator, if the Euribor falls, so do the interests and the profitability that banks obtain with these products. The way to reverse this situation was to make its fixed rates more attractive and thus encourage the contracting of fixed mortgages with the aim of making a greater profit.
However, in recent weeks, the Euribor has changed its downward trend and has shot up to its daily value from -0.431% (February 1) to -0.283% (February 14), although it is still in negative numbers. This rise in prices is directly related to statements by the president of the European Central Bank, Christine Lagarde, at the beginning of February, in which she hinted at a possible rise in interest rates in the eurozone.
To simplify: as the Euribor begins to rise, banks are now interested in contracting their variable mortgages. With the aim of making them more attractive to attract potential clients, the three aforementioned entities (BBVA, COINC, and Bankinter) have decided to make them cheaper and worsen the conditions of their fixed mortgages.
So, is it better to get a variable or fixed-rate mortgage?
In the opinion of our experts, there is a possibility that more banks will join this commercial strategy in the coming weeks. If you are thinking of buying a house soon, you are probably wondering what is best for you: whether to take advantage of the moment and take out a cheaper variable mortgage or, instead, protect yourself from future rises in the Euribor with a fixed mortgage.
As it is not possible to know with 100% reliability how the markets are going to react in the long term or the direction that the Euribor will take, our advice is that you make a decision based on your tolerance for risk:
- If you want to pay less in the short term, an adjustable mortgage may be appropriate. Now, assuming the risk that the quotas rise. It is advisable that you do accounts to calculate if you could pay the monthly payments with higher Euribor (at 1%, 2%, 3%…).
- If you value peace of mind more, a fixed mortgage is a better option. You will pay more in the short term, but it may pay off in the long run if the Euribor rises a lot.
Still not clear? Click on the following button to see what the pros and cons of each type of mortgage are.
