It's time for fixed-rate mortgage
The ECB has embarked on a path of rates increases that, logically, it is not known where to come, while there are still attractive offers for those who opt for the safer fixed rate for their mortgages. And that is the difference between them and is not so much and could be reduced to one or two years away. In December 2005 the average rates of fixed-rate mortgages were 4.64%, while the variables were granted at 3.12%.
The picture has changed. Europe has experienced several years of historically low rates for an extended period of time. Although the fixed and variable rates offered by banks and savings banks up and down at the same time, now may be the right time for a fixed term mortgaged knowing that even now be paid more, you may one or two years, this option is cheaper. Therein lies the challenge. It also provides credit fixed the advantage of absolute tranquility on the evolution of quotas, since during the life of the loan is paid when the same thing. It should be borne in mind that only 25% of mortgage loans in Spain and has been urged by the hike in interest rates, while the rest is awaiting review in the coming months, according to the latest bulletin on the market Spanish drafted by the mortgage insurer Genworth.
Currently, opting for a fixed-rate mortgage will pay one and a half more than if you choose a variable so the decision seems very obvious. However, this gap will be reduced this year and next, as the ECB will raise the price of money. Thus, assuming that the Euribor rose to 3.5% over the differential (around 0.70 points), the distance would be reduced to only 0.4 points. An excess in this hypothetical exercise that makes sense as certain that eliminates any uncertainty about the payments. Five years ago, the Euribor, which is used as the main reference on variable rate loans, was at 4% and in 2002 reached levels of 3.4% since then to fall to levels of 2%. The latest data is the Euribor 2.94% versus 2.3% in February last year.
But despite the calm that offer flat rates, mortgages of this kind have some disadvantages compared to the variables. The main thing is that the repayment period is less so that charges are always higher and pose a greater effort for the buyer of the house. They also have more committees, especially when you want to do full or partial repayment. What is commonplace in the credits are not variable Copper nothing and the fixed rate can reach up to 2% of capital rescued. Despite this, the offer mortgage in Spain is so varied that there are intermediate solutions such as those made with mixed types (fixed and variable). There are mortgages that allow defer payment of capital at the end of depreciation, which would get a share lower.
The best and worst choices
With data from the financial sector at the beginning of the year fixed rate showed a slight rebound, which lies half in the range between 4.64% and 3.89% implemented by i-Banesto and 5.75% Box Sea . The best offer in terms of commissions and interest rate is the e-Bankinter as it imposes a fee for opening of 0% and an interest rate well below the average. This financial institution will continue to other banks by Internet offer the best conditions in commissions and interest rates lower than the average of 4.64%. This is I-Banesto, Active Bank, People's Uno-e-e. Entities with official opening of 1% and interest rates are higher than average Bankinter, BBVA, Caja Madrid and Caja Sea.
The survey for the start of the year, it also specifies that entities apply for opening commissions in excess of 1% and interest rates lower than the average are the SabadellAtlántico Bank and the office Internet Caja Madrid, while with official opening higher 1% and interest rate higher than the average value is the Santander Central Hispano and Caja Catalunya, both in their offices as normal via the Internet.
BBVA from the point that now it is time to think about at a fixed rate mortgages. "The rate differential of 1.5 points (between fixed and variable) that exists today is going to be downsized and may fall below point. Maybe the first or second year, which has opted for the fixed mortgage payment rather than the variable, but in the medium term it may be interesting if you have a fixed rate in Europe continue to rise, "explained from the financial institution.
With regard to the problems posed by fixed on a shorter period and hence a higher share, from BBVA explained that the offer is now more flexible. "We have, for example, the mortgage easy it allows our customers to change from fixed to variable and variable to fixed without any cost. But it has to undertake to have it fixed for a period of 2 or 3 years," comment. "But there are also other systems so that the quota is not so high. In this. If our mortgage allowed to defer payment of principal at maturity of the loan which would get a lower share with a little more time. It should be borne in mind that families pay their mortgages at about 12 or 13 years and that is not normal to wait until their full maturity, "concludes from the entity headed by Francisco Gonzalez.
Since the Spanish Confederation of Savings Banks (Ceca) suggests that 90% of mortgages are still required variables and linked to European Euribor interbank rate. "The sharp rise in the price of housing means that many applicants for mortgages only be fixed in the lower interest rate and think in the short term. It's very difficult to convince a different strategy to apply your mortgage because already come very hurry. It also happens with something like the references mortgage. Almost all are higher than those of the Euribor, but unlike the latter, the other far less range and give more tranquility, "he concludes.
Written by Carlos Lopez on February 27, 2006 with 1 comment.
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