It is a current issue. Euribor, the European index that calculates the interest on variable mortgages in Europe, will continue to rise in 2022. It closed June at close to 1%. This is its highest level in the past decade. Variable mortgage holders will see an average increase of 100 euros in their next installment review. Worse, experts warn that Euribor will continue rising and could reach 1.50% by the end of this year or early 2023.
These are bad times for people who have a variable-rate mortgage. This is especially true if you compare the Euribor Index of a few months back, which was near 0.5% negative, and the one of today. There are still options for mortgage holders to stop their loans from going up due to the European index's rise.
For those who will be signing a mortgage in the near future, it is a good idea to choose a fixed-rate or mixed mortgage. However, those with a variable rate mortgage can change their interest rate to reduce their monthly payments. According to the Bank of Spain, you can change the interest rate on a mortgage. This can be done in two ways: novation or subrogation.
The first is when the mortgage conditions are changed. In this case, the interest rate is fixed and the bank may charge a commission. Subrogation involves transferring the mortgage to another entity, and at the same time choosing a fixed rate. These routes are recommended for those who wish to take advantage of the Euribor rise. Banks are increasing the cost of fixed-rate mortgage interest.
Bonuses and links are another way to ensure that your variable mortgage does not get triggered by an increase in the Euribor. Banks generally offer an interest rate to the Euribor. This interest rate can be decreased if the payroll is directly deposit or if life or home insurance contract is signed. The Euribor rise will have a much smaller impact if the spread is kept to a minimum.
There is also the option of renegotiating these terms with the bank to establish new minimum rates in return for a mortgage at a variable rate. Many entities offered 0.99% plus Euribor at the start of the year, but they now offer 0.79% plus Euribor.
These options may not be enough to stop the mortgage payments from rising. However, you can request the reduction of mortgage payments or to extend the term of your loan. The first is to request that your monthly payments are reduced for a time. In the second case, the amount of time the price is returned will be increased so that installments are easier to manage.
These are great options, as the Euribor rise will not impact the mortgage payments. The fact that the loan can be extended over time means that it will cost more, as you will need to pay more interest. These two options are not recommended and should only be considered if you cannot afford any rise in your monthly payments.