The latest data published by the National Institute of Statistics (INE), corresponding to the month of January 2016, show that the majority of users who have hired a house have referenced their mortgage credit to the European benchmark index, known as Euribor . This is confirmed in these recent data, where 94,0% of the new contracts made used this link to their mortgages. And in any case, above other more minority benchmarks.
Within this general scenario, the fact that the Euribor is historically situated in negative territory is particularly relevant. Indeed, it is currently at - 0,012%. And as a consequence of cheaper price of money by the European Central Bank (ECB), which has left it in one of its last meetings at 0%. A certainly atypical and unusual scenario that has to affect all users, and especially customers who have or are going to take out a mortgage loan.
Not in vain, is the question that these people ask themselves, how interest rates so low will affect their mortgage, and as in this case in particular, negative ones. Well, in principle it has served them so that spreads have narrowed significantly. And as a consequence, they are paying more affordable monthly installments, which is generating savings in contracting these banking products.
Spreads below 1,50%
Banks have decided to adapt to the new scenario and offer their clients mortgages with better conditions in your hiring. Basically through a reduction in their spreads. They have passed in a few months of something more than 2% to position itself in the most aggressive proposals below the 1% barrier. With an average in the reduction of between half and one percentage point. And that in practice means that you pay less euros in your installment every month.
Of course, as long as the mortgage you have subscribed is linked to a variable interest. If for any reason, you have contracted them at fixed interest, you will not be able to benefit from the mortgage reductions, nor from the trend that the European benchmark index has been maintaining in recent months. So far it only remains to see how long this trend will last. Although, of course, already there is little room to continue the decline in interest rates.
Banks, on the other hand, try to promote increasingly competitive offers to face the competition. Y they do not hesitate to lower the interest with a certain frequency, until leaving them in some specific cases at 0,85%, which is the best proposal that you can receive at the moment, and regardless of other conditions that their contracts contemplate. Determined the offer that all national banks have been developing.
Euribor: Better conditions
What impact will it have on bank users? There is no doubt that interests will relax, as has been happening for some months. But with a problem as pointed out by some important executives of the banking entities in charge of marketing these products. And it is that to save their interests they will have no choice but to increase or create new commissions that can harm the interests of the mortgaged.
As a consequence, the formalization of a loan for the purchase of a home will be cheaper, but penalized under more expansive commissions by the issuing entities. It is, in short, what you can expect from now on when you go to the offices to request one of these products.
But while this new scenario arrives, the strategies of financial institutions have led them to promote a series of commercial strategies which are aimed at making Euribor-linked mortgages more attractive to their clients. They are of diverse nature, and as the ultimate goal of improving your underwriting conditions. They are generally very recurrent, although some with a more innovative touch always stand out.
The most used is that you can discount the price of the mortgage based on the products contracted with your bank (personal loans, insurance, pension plans, securities portfolio, etc.). And whose operation is very simple, since it is based on the fact that as you formalize more banking models, the interest rate will be progressively lowered linked to your mortgage linked to Euribor. With a maximum percentage that is around 2%
Payroll requirement
Another of the demands of the banks is based on the fact that they will demand that direct your payroll (or other regular income), and even the main household bills (electricity, water, gas, mobile ...), also helping you to contain your expenses on mortgage loans. They are also usually marketed without any commission, or other expenses in their management or maintenance. Making its formalization very attractive at this time.
But they are not the only claims that banks make to sell this kind of product to their main customers. A trend in recent months is that there are without ground clause, after strong controversies with consumer associations and bank users. This new condition will allow you to take advantage of the declines in the European benchmark even more, even much more than you imagine in the current scenario of monetary restraint. To avoid this problem, you will have no other solution than to review the fine print of the contract, in case it incorporates this clause so unfavorable for your interests as a holder of a mortgage loan.
And that in any case has resulted in even mileuristas, with incomes of around 1.000 euros, being able to purchase their home. It is true that they do not have excessive proposals, but at least they are not displaced from the real estate market. Counting on more than one format that presents these special characteristics. Habitually are intended for income from 750 euros, something unthinkable just a few years ago.
If you accept any of these requirements imposed by banks, without a doubt you can improve interest rates, by at least half a percentage point, and with respect to the initial rates that the entities contribute in their offers. Although with the logical problem that you cannot know what will happen in the next few years. Where the Euribor trend is likely to change. Not surprisingly, it is not to be expected that it can continue in this trend for 10 or 20 more years. It will be a scenario that you should contemplate if you are going to subscribe a mortgage from now on.
Characteristics of the new mortgages
With all the changes produced in mortgages, as a consequence of the drop in interest rates in the Euribor, there are another series of variables that have been modified over the years, and that you should know to better manage conditions this bank product. And especially not to get an unpleasant surprise.
To begin, prepare your savings to formalize the operation, since they do not finance it in its entirety. But, on the contrary, they only reach 70% and 80% of their appraised value. In order that clients do not dangerously increase their level of indebtedness, as warned by the European issuing banks, and in this case in particular the Spanish one. If you do not have a minimum savings bank, it will be much more difficult for you to close the operation with the entity.
As regards their repayment terms, they have also been significantly reduced. It is already very difficult to sign a contract for 40 or 50 years, as you did repeatedly a decade ago. The current mortgages present shorter periods to finalize the operation, which move in a reduced range that goes from 25 years and up to 35 as a maximum limit. It is a new strategy on the part of the banks so that its maturity is shortened, and recover their money earlier.
5 tips to find the best mortgage
Of course, it is a good time for you to subscribe now this real estate transaction, with many advantages for your interests, and of which you can take advantage of in the current mortgage offer, after the fall in the Euribor. To make this easier for you, you will have no choice but to import some of the best tips to reduce your hiring expenses, which would start from the following lines of action.
- You do not limit yourself to reviewing just a few mortgages, but due to the drop in the European benchmark index, new formats are opening that can be very advantageous for your profile as a user.
- At this time you can subscribe mortgages with a spread below 1%, And they are even marketed without commissions or other expenses in their management. You will have to take advantage of all the opportunities that are presented to you from now on.
- If you are in the idea of hiring a mortgage in the coming years, it will not hurt that you go formalizing a product for savings. Not surprisingly, the financing of your new home will no longer be for the entire appraisal price.
- Greater bonding With your bank it will help you to contain the expenses for contracting this product for financing, having more affordable monthly payments.
- If the trend in interest rates is going to remain at the same levels as up to now, it will be convenient for the mortgage do not incorporate any floor clause, which will be very damaging in this scenario in the price of money.