The relationship that exists between those who are Mortgages and the Euribor is more than direct. Not surprisingly, the latter is the reference to which is linked the vast majority of mortgage loans. And that in recent years it has allowed the lines of credit for the purchase of a home to be formalized under more competitive conditions by offering better interest rates that are reflected in the differential proposed by the financial entities in charge of marketing this highly demanded financial product. between users.
Of the 7.129 mortgages with changes in their conditions, 41,4% are due to changes in interest rates, according to the latest data provided by the National Institute of Statistics (INE). After the change in conditions, the percentage of fixed interest mortgages increased from 12,0% to 17,2%, while that of variable interest mortgages decreased from 87,2% to 81,7%. The Euribor is the rate to which the highest percentage of variable rate mortgages refers, both before the change (74,5%), as after (75,5%).
Because the Euribor is the European benchmark for linking mortgages. It has replaced others who have been less effective in carrying out this real estate operation. In some cases because these benchmarks have become completely out of date and in others because of their early disappearance. In any case, you must be very clear that the Euribor will affect you if you go to take out a variable rate mortgage. Never in those tied to a fixed rate since they are governed by other completely different parameters.
What does the Euribor provide?
Linking a mortgage loan to this European benchmark is currently very advantageous for your personal interests. Because it is located at historical lows and in negative territory. Right now, the Euribor is - 0,191%, as a consequence of the cheaper price of money by the European Central Bank (ECB). And that has led to the price of money not being worth now absolutely. That is, it is located at 0%. Therefore you are interested in hiring it because you can save a few euros compared to other secondary benchmarks.
The fact that the Euribor is currently so low makes the mortgage a little more affordable if you subscribe it right now. Among other reasons why you will pay some much less demanding monthly installments that until a few years ago. Not surprisingly, this financial product is presented with not so onerous spreads. To the point that in the current bank offer you can find spreads below 1%.
New and cheaper mortgages
As the new mortgages are at historical lows, it will be much more interesting to formalize from this moment. Not surprisingly, it can save you between one or two percentage points over credits from previous years. But there are also other side effects that you can benefit from. One of them is the commission exemption and other expenses in its management and maintenance. As a consequence of the more than positive evolution of the European benchmark index. This can lead to you being able to reduce your monthly fee by more than one hundred euros.
On the other hand, it also implies an improvement in the hiring conditions and that is reflected in that you have to pay yourself less money every year. However, this scenario will not last forever and at any moment the interest rates in the euro zone. With which, this foreseeable will be transferred to the Euribor. That is, it will no longer present percentages so advantageous for your interests. In contrast to fixed rate mortgages that will not be influenced by this scenario. Because through this financing model you will always pay the same every month. Whatever happens in the financial markets. Therefore, it will give you greater peace of mind because you will know at all times what you have to pay for the contracting of this financial product.
Only linked to the variable rate
Another aspect that cannot go unnoticed is that the European benchmark, the Euribor, is only linked to variable rate mortgages. Because they depend on the types that determine financial markets for this class of real estate operations. Because it is an index that has been created in the euro zone to unify the criteria in the demand for mortgage loans. Where you will pay based on the evolution of the benchmark indices. It will never be the same, but will undergo significant fluctuations over the years. What happens is that now it is very profitable to link this product for financing to Euribor.
From this general scenario, you cannot forget that banks apply a percentage to you on the value of the Euribor. This is what is called the difference, that is, what the mortgage loan will really cost you. At the moment, these margins move in a band that goes from 1% to 3%. Therefore, you should not pay particular attention to how the European benchmark is doing. If not, on the contrary, in the differential offered by the financial institution. At the end of the day, it is from where the fee that you will have to pay every month will come out.
The origin of the Euribor
This index to which most mortgage loans are linked is an acronym for Euro Interbank Offered Rate. That is to say, and so that you understand it better, it is the European type of interbank offer. In any case, it is very important that values that the expectations of a normalization of the monetary policy of the European Central Bank (ECB) have not yet been translated, as might be expected, into a anticipated rebound of this index. This means that it would not be very strange that in the coming months it could have a rebound in its price. As with other financial assets.
In another vein, the Euribor may have a short, medium and long term application so it is published for different periods: annual, 9 months, 6 months, 3 months, 1 month, 3 weeks, 2 weeks, 1 week, daily. The accrual is important in the review of bank loans and mortgage loans. Because you will pay more or less in your monthly fee depending on the evolution of the last months. This is one of the reasons why this reference source is so cheap at the moment. To the point of being very receptive to customer demand.
Euribor Plus: what is it?
In any case, there is a variant of this reference that is going to be implemented in the euro zone in the coming months. We are referring to the so-called Euribor Plus. What does it consist of? Well, in something as simple as that it will provide a greater degree of transparency in operations of these characteristics. For a reason that you will understand without much difficulty since this new source of reference in mortgages will be based about the operations carried out, and not on estimates, as up to now happened with the Euribor. However, there is still no definite date to settle in the European common space. With a structure very similar to this one.
In any case, if your intention is to explore other opportunities at the time of formalization of this type of credit, do not doubt that you have more options to link this operation to other benchmarks. You must know that all of them are official and published by the Bank of Spain, being able to select them without any type of restriction. You will only have to assess which is the model that best suits your profile as a demander of this kind of banking products. Although according to the latest official data they do not represent more than 9% of the operations signed during the last year.
Other benchmarks
Some of the Euribor rivals are made up of the IRPH entities (Reference Index of Mortgage Loans), which is used by almost 8% of the mortgages contracted in the Spanish state. While on the contrary, another of the alternatives is embodied in the so-called IRS (Interest Rate Swap). It is an alternative index to which you can also link the mortgage. Although in this case - and keeping a certain similarity with Euribor Plus - it reflects the evolution of five-year interest rates. A substantial difference from the reference source that is the subject of this article.
Finally, it is also present, although in a clear retreat on customer demand, the mibor (Madrid InterBank Offered Rate). On this occasion, under an interbank interest rate that is applied in the Madrid capital market. However, it has lost the strength it developed in the 80s and 90s. In any case, it will be up to you to decide to which of them you are going to link the mortgage you are going to take out. Where the Euribor is at the forefront of all these indices. In all cases, you will only have to assess which is the model that best suits your profile as a plaintiff of this kind of banking products.