The European Central Bank has raised interest rates another 50 basis points in February 2023, leaving the ‘price of money’ at 3%, the highest since 2008. The fifth consecutive rise comes despite the easing of inflation, whose interannual rate in the euro area moderated in January for the third consecutive month, standing at 8.5%, seven tenths below the 9.2% in December and at its lowest level since May 2022.
The main affected by this rise in interest rates will be the Euribor, which defines the average interest rate of loans from financial institutions and therefore mortgages with variable interest. Thus, the new increase adds more pressure to the mortgage market. The Euribor has risen more than 3% in the last year, going from being negative at the beginning of 2022 to closing January 2023 at 3.337%.
With the average of 3.333% registered so far in January, a person who has contracted a 30-year variable mortgage of 150,000 euros and with a differential of 0.99% plus Euribor will suffer an increase in their mortgage payment of around 294 euros, reports Europa Press. In absolute terms, you will go from paying about 450 euros to about 744 per month, which is equivalent to an additional annual outlay of more than 3,500 euros.
With the same conditions, a mortgage of 300,000 euros of capital pending amortization and 30 years pending payment would have to assume a monthly increase of 588 euros, which means more than 7,000 additional euros per year.
Given the rise in the Euribor, the Government and banks reached an agreement at the end of 2022 that establishes new vulnerability profiles that will be eligible for mortgage aid for the most vulnerable families, although entities will not be obliged to apply them if they do not adhere. According to calculations, a family with a mortgage of 120,000 euros and a monthly payment of 524 euros after the interest rate review, will see their payment reduced by more than 50% during the five-year grace period, up to 246 euros. .
The Bank of Spain on its website and in its applications for mobile phones (iOs and Android), has a free simulator so that citizens can calculate the new installments of their mortgages.
It should be remembered that fixed mortgages will not be altered, but those that are initialed in the future will be indirectly affected by the update now set by the European Central Bank (ECB). Everything indicates that this will not be the last rate hike this year and that there will be as many as are necessary to smooth out inflation.
Asufin believes that at the end of the year it will be 2.2% and 3% in 2023, while HelpMyCash calculates about 2.5% currently and a figure close to 3% when the future increases are consumed.
Basic data to calculate mortgage payments in the simulator:
Consult the Bank of Spain mortgage simulator. The platform can also be used for those interested in acquiring a new mortgage and comparing the offers of the different banking entities.
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