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Over four in 10 new mortgages are fixed-rate deals
Thursday, April 25, 2024 @ 6:42 PM

A SHARP rise in the number of fixed-rate mortgages in Spain has been reported in the past two years – and they now account for 43% of every new loan taken out.

Until spring 2022, mortgages with an interest rate set for between two and 10 years were almost unheard-of in Spain, particularly as variable-rate loans are reviewed annually, meaning relative security in everyday financial planning.

But the unprecedented hike in the Eurozone interest rate, or Euribor, from below zero to above 4% - going from negative figures to over 3% in seven months in 2022 – have led to homebuyers opting for greater long-term stability.

Variable-rate mortgages, which follow the Euribor, are, by default, one-year fixed-rate deals, since the interest that applies is adjusted annually, meaning no unplanned monthly fluctuations to deal with.

Some loans now operate a hybrid system between fixed and variable rates, and are known as 'mixed mortgages' or hipotecas tipo mixto.

These have risen from 14% of new home loans in mid-2022 to 40% in the final quarter of 2023.

Fixed-rate mortgages with a set level of interest remaining the same for between five and 10 years are also fast becoming the norm for homebuyers – between spring 2022 and the end of 2023, they rose from 4% to 17% of new loan deals.

Altogether, mixed and fixed, with a minimum set interest rate of five years, accounted for 43% of new mortgages contracted up to the end of November 2023, according to statistics published by the Spanish Mortgage Association (Asociación Hipotecaria Española, or AHE).

A 'mixed-type' mortgage, the AHE explains, is where the interest rate remains the same for a period of between one and 10 years – effectively, a short-term fixed-rate deal – after which it reverts to a variable-rate loan.

'Pure' fixed-rate loans, with set interest rates for up to 10 years and the option to renew these once the deal expires, continue to make up a significant chunk of new mortgages – but their popularity has declined since the initial Euribor rises.

Back in June 2022, when the European Central Bank (BCE) started a chain of dramatic, consecutive monthly increases in interest, fixed-rate loans came to make up a massive 67% of new mortgage deals – but this has now dropped to 43%, amid cautious optimism that the Euribor may start to come down again as Eurozone inflation levels stabilise.

Traditionally, variable-rate loans made up the bulk of new mortgages, and those still in force since before the Euribor increases – which have not been replaced or renegotiated – as opposed to new loans continue to make up 55% of active loans.

By contrast, post-2022 new mortgage deals on a variable-rate basis only account for 16% of the total.



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