Record-breaking Year for Fixed Mortgages

Current issuing of fixed mortgages beats previous volumes: reaching maximum in April and heading for a record-breaking year.

Current issuing of fixed mortgages beats previous volumes: reaching maximum in April and heading for a record-breaking year.

Source: National Institute of Statistics (INE).

In the last 16 months, approximately 35% of all mortgages formalized in Spain have been at a fixed interest rate, an unprecedented number to date.

According to INE data, fixed-rate mortgages have experienced the best month in history with 11,320 transactions, almost exceeding the entire 2013.

To see how big the numbers are, we calculate the monthly average from previous years: 2008 to 2015, between 1,100 – 2,300 loans on average per month were formalized. And since the crisis of 2008, there have been three months in which more than 11,000 fixed loans were formalized: May and June of 2017 and January 2018.

If we take a look at the historical volume in 2016 there was already an important positive trend (5,170 each month), although the true turning point was in 2017, with more than 9,800 monthly loans on average. However, so far this year we are above the 10,700 transactions per month, an increase of more than 9%.

Favourable numbers continue and this year around 42,860 fixed mortgages have been issued, a figure that exceeds those that were formalized for 2014 and 2015 together.

Favourable numbers continue and this year around 42,860 fixed mortgages have been issued, a figure that exceeds those that were formalized for 2014 and 2015 together.

Source: National Institute of Statistics (INE).

In addition, the overall percentage of fixed-rate mortgages in new operations is again close to 40%. April, in fact, has been the second highest month since 2008.

The overall percentage of fixed-rate mortgages in new operations is again close to 40%. April, in fact, has been the second highest month since 2008.

Source: National Institute of Statistics (INE).

If the current trend continues, we will experience a record in 2018, compared to 2017 with around 36,500 fixed-rate loans.

Meanwhile, the experts endorse these alternatives offered for homebuyers, especially when the market expects the 12-month Euribor going up throughout this year, ahead of a potential rise in interest rates in the eurozone for next summer.

“The record number of new fixed mortgages is due to several reasons. The increase in the overall volume of new mortgages derived from favourable conditions in the housing market. On the other hand, there is greater offer of products at a fixed rate, since almost all banks have short and long-term options. And, finally, the forecast that interest rates will rise (slowly) in the future, makes buyers look for protection and tranquillity that these products offer, ” according to a mortgage expert Juan Villén.

Cheaper than the Euribor average

Are fixed rate loans competitive? Well, the data speaks for itself: currently, the best-fixed mortgages are at 2% and 2.5% interest rate depending on the bank and its term, which is fully in line with the historical average of the 12-month Euribor at 2.17%.

Depending of terms and conditions the current options are, for example, BBVA with a 20-year offer at an interest of 2.05%, or Kutxabank with a rate of 2.1% and other entities such as Abanca, SpainDuero or Santander 2.15%. For 30-year term, Liberbank offers a fixed loan at 2.25%; Abanca and Bankinter at 2.35%, while Kutxabank and Abanca offer alternatives with a rate of less than 2.5%.

In exchange for achieving these rates, many banks establish commission (opening) or early cancellation fees and liabilities such as direct debit of payroll or insurance contract.

Drumelia Real Estate is happy to assist its clients to obtain a mortgage. We collaborate with the banks of Sabadel, Santander and La Caixa in Spain.

13/08/2018