When hiring a mortgagewe find ourselves with the decision of opting for one that is fixed, or there are also mixed and variable types. The latter are in a moment that could be defined as “delicate” due to the evolution of the Euriborthe reference index that determines the interests of these mortgages. In this way those families or people who chose a variable mortgage at the time may face an increase in payments, according to the Bank of Spain.
The economic uncertainty and the continuous increases in interest rates by central banks have generated a climate of concern among mortgage holders, especially those who chose to pay a variable mortgage payment. Although 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 coming months will be crucial to determine the real impact of the evolution of the Euribor on the pockets of those mortgaged. This index, which has shown an upward trend since mid-2023, seems to show no signs of stopping, and financial analysts already anticipate that it will continue to rise before the end of the year. This situation forces homeowners with variable mortgages to prepare their finances to face possible increases in their monthly payments, which could be a significant economic blow for many families.
Bad news if you have a variable mortgage
The Bank of Spain has launched a warning from its website, aimed especially at those who are considering taking out a variable rate mortgage. The institution has insisted on the need for 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 could face in the coming months.
The mechanics of variable mortgages: 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 implies that, unlike fixed-rate mortgages, the monthly payments do not remain constant and can rise or fall 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 rate increases, such as the one anticipated before 2025, payments may increase considerablyaffecting the family economy.
In recent months, the Euribor has shown a clear upward trend, driven by central banks’ decisions to raise interest rates to control inflation. This directly translates into an increase in variable mortgage payments, and although some analysts consider that this phenomenon could moderate in the medium term, others anticipate that the index will continue to rise, reaching levels not seen for more than a decade. This situation poses a challenging scenario for those who have a variable mortgage, as they will have to face higher payments.
Forecasting tools and the importance of clear information
Given this panorama, experts recommend that future mortgage holders use all the tools at their disposal to evaluate 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 odds could vary depending on the fluctuations of the Euribor. These documents are not only mandatory, but are essential so that consumers can make informed decisions and avoid unpleasant surprises in the future.
The FEIN, in particular, must be delivered at least 10 days prior to the signing of 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 a rise in the Euribor would have on their monthly payments, helping them evaluate whether a variable mortgage is really the best option for them. Furthermore, the Bank of Spain has stressed the importance of banks highlighting, clearly and in large letters, the warning about the variability of installments, thus preventing this information from going unnoticed.
Strategies to mitigate the effects of Euribor increases
For those who already have a variable mortgage, there are some strategies that can help mitigate the effects of an increasing Euribor. One option is carry out partial capital repayments, which can reduce the monthly payment or shorten the term of the mortgage, thus reducing the impact of increased interest. Another alternative is renegotiate the conditions of the loan 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.
