He price of new mortgages broke in January the 3% psychological barrier until it is in the highest level since June 2014. And it is that the bank has been transferring to these products the rise in interest rates that the European Central Bank (ECB) undertook since mid-2022 and its effect on the Euribor, the index to which most loans are referenced. variable rate, which has shown an unstoppable trend.
According to the data of the Bank of Spainhe TEDR interest rate of new operations, which is similar to the APR, but without including associated expenses such as amortization insurance premiums and commissions, closed the first month of the year at 3.19%, 175 basis points more than in January 2022, when it stood at 1.44% and only 18 points from the close of the Euribor in January, when it climbed to 3.337%. From December to January, the jump has been almost 10%.
This has led the weighted average rate to exceed the 3.11% set in June 2014, when despite the fact that the ECB, with Mario Draghi at the head of the body, had embarked on the opposite path to that which his replacement, Christine Lagarde, and that the official price of money stood at 0.25%, the mortgage rates reflected the difficult moment that the banking sector was going through. The reason is that financial institutions were pending bank restructuring and European orders, which meant that the credit tap was closed. Its opening was long and gradual.
Still, the average interest on new mortgages signed in January this year is almost half of what was closed in September 2008, just when the subprime mortgage crisis broke out in the United States and ended up infecting the financial system worldwide. At that time, with a Euribor that exceeded 5% (5.393%), mortgage interest was around 6%.
New fixed rate mortgages below 3%
However, the data reveals that this price increase in new operations there has been more in variable rate mortgages than in fixed ones. Thus, the weighted average price of these mortgage loans, with terms of more than ten years, remain below 3%. Specifically, in January it stood at 2.76%. However, the rise in the last year has been 108%. This is due, explain sources in the sector, to the fact that these loans would be approved in October or November, dates on which a fixed-rate mortgage loan could still be found with an interest of 2.5%.
As for the variables (which the Bank of Spain interprets as “up to one year” even though it has a term of 15 years) closed January at 3.23%, in line with the Euribor data, but well above the 1.33% of a year ago. year (almost 200 points more). The reason is that these products would apply a differential of 0.5% plus the Euribor for November (or October). However, the largest increase has occurred in those mortgages that start from a fixed interest, the first 5 years and a variable interest is applied from the sixth. The price of new loans has gone from 1.43% to 3.80%, which means an increase in cost of almost 166%, while those with a fixed term of 10 years and then become variable have been at 4.74%.
Credit will continue to get more expensive
Looking ahead to the remainder of the year, the outlook for the evolution of inflation indicates that the price of new operations will continue to rise. To begin with, because core inflation, which excludes energy prices and unprocessed food, has yet to reach a ceiling. And this will lead the ECB to continue raising interest rates. The market is already delaying any downward movement to 2025.
Therefore, everything indicates that 2024 will be a year where the interest rates remain around 4%, explain market sources. What’s more, the organization’s chief economist, Philip Lane, anticipates four more increases of half a point each, which could take the official price of money in the eurozone up to 5%. And this is also reflected in the evolution of the Euribor, the index to which most mortgages are referenced. The indicator is still unleashed and March has started with levels of 3.8%, the highest level since 2008.
