Mortgage holders could save over 12,000 euros by renegotiating their loans or switching to fixed-rate products, according to new analysis from the Organization of Consumers and Users (OCU).
The OCU’s recommendation targets borrowers currently paying variable rates with differentials higher than 1% over the Euribor. For a representative mortgage of 150,000 euros initiated in September 2019, the organization estimates that moving to a fixed rate of approximately 2.9% could lower monthly payments from 752 euros to 692 euros. This shift provides a monthly reduction of 60 euros, totaling roughly 720 euros saved annually.
Financial savings are not guaranteed and must be weighed against the costs of modifying an existing contract. While transitioning to a fixed rate offers predictability against future market volatility, these benefits diminish if the Euribor index falls.
The OCU notes that even minor adjustments, such as reducing a differential by 0.25 percentage points, can yield savings exceeding 2,700 euros over the remaining life of the loan, even after accounting for the initial costs of the modification.
Borrowers generally have three paths to improve their mortgage terms, each carrying different administrative burdens and costs:
- Novation: Negotiating directly with the current lender to modify the existing contract.
- Subrogation: Moving the loan to a different financial institution.
- New Mortgage: Canceling the existing loan entirely to initiate a new one, a process the Bank of Spain notes often involves more complex paperwork and higher expenses than the other two options.
The Bank of Spain warns that homeowners should look beyond the monthly payment amount when considering a change. Extending the repayment term can make a monthly installment appear more affordable while simultaneously increasing the total interest paid over the life of the loan. Consumers are advised to calculate the total outstanding debt rather than focusing solely on the immediate reduction in their monthly bill.
Borrowers must factor in associated costs, including bank commissions, appraisal fees, and potential requirements for linked products like life insurance. These hidden costs can significantly offset the perceived savings of a new interest rate.
Not necessarily. While a fixed rate offers protection against rising interest rates, it prevents the borrower from benefiting if the Euribor decreases.
No, lenders are not obligated to accept a request to modify an existing contract. However, if a borrower considers a subrogation to a different bank, the current lender may present a counteroffer to retain the client.
Whether these potential savings remain achievable depends on future fluctuations of the Euribor, which the OCU’s analysis assumes will stay stable. It remains unclear how individual bank policies regarding administrative fees will evolve as more customers seek to renegotiate their existing loan agreements.