When hiring a mortgagewe are left with the decision to opt for a fixed model, or there are also mixed and variable types. The latter find themselves in a moment that could be described as “delicate” due to the evolution of Euriborthe reference index which determines the interest on these real estate loans. In this way, those families or people who chose a variable mortgage at that time could face increased payments, depending on the Bank of Spain.
Economic uncertainty and continued increases in interest rates by central banks have generated a climate of concern among mortgage holders, particularly those who have chosen to pay a variable mortgage payment. Even if the future is not completely defined, forecasts before 2025 are not encouraging for those who have a mortgage of this type according to experts, who warn that the next few months will be crucial to determine the real impact of the evolution of the Euribor on the pockets of the mortgaged. This index, which has shown an upward trend since mid-2023, does not seem to show any signs of stopping, and financial analysts already anticipate that it will continue its rise before the end of the year. This situation requires homeowners with variable mortgages to prepare their finances for possible increases in their monthly payments, which could be an economic blow for many families.
Bad news if you have a variable mortgage
The Bank of Spain has issued a warning on its website, aimed in particular at those considering taking out a variable rate mortgage. The institution insisted on the need to banks report clearly and in detail on the associated risks to these financial products, especially in a context of high volatility like the current one. It is essential that future mortgage holders understand how variable mortgages work and the possible scenarios they may face in the coming months.
The mechanics of variable mortgage loans: advantages and risks
Variable rate mortgages are characterized by having an interest that fluctuates over timedepending on the behavior of a reference index, generally the Euribor. This means that, unlike fixed rate mortgages, monthly payments do not remain constant and can increase or decrease depending on variations in the financial market. When interest rates are low, this type of mortgage can be very attractivesince the fees are more affordable. However, in a context of In the event of a rate hike, such as that expected before 2025, payments could increase significantlyaffecting the family economy.
In recent months, the Euribor has shown a clear upward trend, driven by decisions by central banks to raise interest rates to control inflation. This translates directly into an increase in variable mortgage payments, and although some analysts consider that this phenomenon could subside in the medium term, others anticipate that the index will continue to increase, reaching levels not seen for more than a decade. This presents a difficult scenario for those with a variable mortgage, as they will face higher payments.
Forecasting tools and the importance of clear information
Faced with this panorama, experts recommend that future mortgage lenders use all the tools at their disposal to assess the potential impact of Euribor increases on their finances. THE Banks are required to provide documents such as the European Standardized Information Sheet (FEIN).) and the document Standardized Warnings (FiAE), which include simulations of how probabilities might vary depending on fluctuations in the Euribor. These documents are not only mandatory, but essential for consumers to make informed decisions and avoid unpleasant surprises in the future.
The FEIN, in particular, must be delivered at least 10 days before signing the contract. and must include clear examples of possible quota variation scenarios. This transparency is crucial, as it allows buyers to visualize the impact that an increase in Euribor would have on their monthly payments, helping them to assess whether a variable mortgage is really the best option for them. In addition, the Bank of Spain has highlighted the importance for banks to highlight, clearly and in large letters, the warning regarding the variability of payments, thus avoiding this information going unnoticed.
Strategies to mitigate the effects of Euribor increases
For those who already have a variable mortgage, certain strategies can help to mitigate the effects of a rise in Euribor. One option is make partial capital repayments, which can reduce the monthly payment or shorten the term of the mortgage, thereby reducing the impact of increased interest. Another alternative is renegotiate loan terms with the banklooking for a possible conversion to a fixed rate, although this option will depend on market conditions and the characteristics of each particular mortgage loan.
