On June 15, the European Central Bank (ECB) announced a new increase in its main interest rate, which went from 3.75% to 4%. And the president of the organization, Christine Lagarde, has already confirmed that there will be a new increase in July and that she will keep the rates high “as long as it takes” to contain the high inflation in the euro area.. So they are coming bad times for those who want to take out a mortgagesince the interests of these products will continue to rise until further notice.
In fact, the former president of the ECB, Mario Draghi, stated openly a few weeks ago that “we are heading towards a world of higher interest rates“ and that interest rates will not drop in the medium term. And in this scenario, according to the financial comparator HelpMyCash, choose correctly the type of mortgage that is going to be contracted (fixed, mixed or variable) it’s more important than eversince a bad decision could seriously jeopardize the domestic economy of the potential mortgagee.
From the comparator they affirm that signing a fixed mortgage is the safest option in a context of rising rates, since the installments will always remain stable and the debtor will be able to better plan his payments. According to HelpMyCash analysts, if a bank offers a fixed interest of around 3% without many associated products, it is advisable to accept his proposal immediately.
Of course, today, few banks grant such cheap fixed mortgages. In fact, the average interest on these products is significantly higher: more than 3.50%. Even so, there are still entities that offer prices below that average. This is the case, for example, of the BBVA Fixed Mortgagewhose interest is from 2.90% for a term of 30 years if the client directs his salary and contracts home and life insurance from the bank.
But What would happen if Draghi’s forecasts are not met and rates do drop in the short term? In that case, it is true that variable mortgages would become cheaper, since the Euribor would fall (it is the index with which interest on these products is calculated). However, the banks would also make their new fixed-rate mortgage loans cheaper, so the client could refinance his credit to reduce his interest or go to the variable rate, either with an agreement with your entity or with a transfer to another bank.