Denmark, France and Portugal are the countries with the cheapest mortgages in Europe, with interest rates that average 1.11%, 1.57% and 1.93%, respectively. Spain resists and, despite the sharp rise in rates, occupies the fourth position, with 2.02%according to data from the European Mortgage Federation (EMF) corresponding to the third quarter of 2022.
For the whole of the European continent, the unweighted average interest rate was 3.48% in the same period, which places Spain 42% below the European average with the cheapest average rates. In the case of fixed mortgages, Spain comes out even better off.
Taking age into account, for a fixed-rate mortgage up to five years old, Spain climbs to second place with the cheapest rates of 2.29%, only surpassed by Finland (1.52%). If the seniority is over ten years, it appears as the country in all of Europe with the most competitive rates (1.79%), according to the EMF.
The general director of the Institute of Economic Studies (IEE), Gregorio Izquierdo, in statements to Servimedia, considers that “the financial sector in Spain is especially efficient and competitive in the conditions offered to its borrowers in relation to our environment”. In fact , “was one of the first to anticipate the foreseeable change in the interest rate scenario, offering new mortgages in very attractive conditions of fixed ratesyou”.
It is precisely this policy CaixaBank has been applying for six years with the signature of 70% of your fixed-rate mortgage portfolio, long before interest rate increases. Currently, for the bank it already accounts for 90% of new mortgage contracts with the aim of minimizing the impact of the escalation of interest rates on its clients and in line with the recommendations of the Bank of Spain.
Other banks maintained similar figures last year in this regard, such as Bankinter, which signed 80% of new mortgage contracts at fixed rates in the first quarter of 2022, a figure that has been declining in the last year until reach 42% in the same period of 2023.
Izquierdo highlighted that, “unlike in the past, in which mortgages were referenced with variable rates in relation to the Euribor, now close to two thirds of the mortgages that are granted are made with fixed rates, which by definition are set on medium and long baseswhich are not only more stable, but are currently also more favorable references, after the rises in short rates this past year”.
Thus, the latest statistics of the INE shows that 65.7% of new mortgagess constituted on homes in February were fixed and the remaining 34.3% at a variable rate, when three years ago it was practically the other way around.
Examples of entities that opted for the variable rate in 2022 are banks such as Unicaja, which maintained 60% of its individual portfolio at a variable rate, and Ibercaja, with 85% of its new mortgage production last year.
SITUATION IN EUROPE
In Europe, the rise in the Euribor and the increase in the cost of variable-rate mortgage installments already contracted has also caused an increase in the contracting of fixed-rate mortgages. In this way, the countries where the signing of new fixed mortgages was most noticeable in the third quarter of 2022 was Belgium, with 84.9%, Spain, with 61.1%, and Germany, with 41%.
He Director General of the IEE clarified that “our real estate market is, within Europe, one of the most solids and with better fundamentals and therefore with less risk in ratios such as financial effort, home and job creation, price levels and debt… which allows us to enjoy lower rate differentials than those of other countries”.
Izquierdo asserted that “the trend in new credit operations is clear, and it will foreseeably continue in the coming months.”Most mortgages are granted at fixed rateswhich both reduces the financial effort in the short term while mitigating the risks of financial vulnerability in scenarios of interest rate rises such as those we have experienced in recent years”.
Finally, it concluded that “general recommendations cannot be made on the convenience of some references or others, since the changing needs and circumstances of each household are what ultimately determine and condition their financial needs.”
