Some experts call it a “perfect storm.” On the one hand, homes have become significantly cheaper in recent months, to such an extent that their prices in August were 7.3% below the average amount for the same period last year, according to notarial statistics. On the other hand, mortgages have never been so cheap, due to the effect of a Euribor – the reference index of the variables – at historic lows. If to this is added the usual race of entities to improve their results in the final stretch of the year, attracting customers through mortgage loans with advantageous conditions, exacerbated this time by the attempt to recover what was lost in the hardest part of the pandemic , this time will be especially favorable to finance the purchase of a house, according to the professionals who operate in this sector.
“The crisis we are going through will keep interest rates low for a time, leaving a very attractive outlook for all those interested in buying a home,” predicts the general director of the bank comparator iAhorro, Marcel Beyer. The Euribor closed October at -0.466%, its third consecutive historical low so far this year, which results in a drop in interest rates that apply not only to variable loans, which depend directly on variations in this index, but also in the fixed ones. This is so because, in order to secure more clients, banks have also been forced to improve the offer of this product, so that fixed interest rates often already equal the variable rates that were previously given.
In this way, a 30-year mortgage with an interest rate of 1.5% for life is no longer a chimera, and the margins to improve these conditions are practically exhausted. “Prices are already very tight in the supply of Spanish banks and where the persistence of low rates will be most noticeable is in variable mortgages; in this area, the decrease in the Euribor could cause a drop in interest rates of up to 25 basis points ”, predicts the marketing and advertising director of Evo Banco, Paz Comesaña.
Experts also point out that, in general, banks are being less demanding than in the past when it comes to product linkages associated with the loan. “If the client wishes to obtain a better price, he is offered the possibility of opting for the subsidized mortgage just by direct debiting the payroll and contracting home insurance through the entity”, Comesaña underlines, referring to his bank.
More agile procedures
All this means that the market has started this last quarter “overflowing”, according to the director of the intermediary Tu Solution Mortgage, Ricardo Gulias. In his words, “it seems incredible that in the midst of a pandemic, almost confined and with many businesses closed, consumers are launched.” However, “whoever has a job, hopes not to suffer unemployment and maintains his salary, is focused on finding a home that meets his expectations,” he adds.
This buyer is now facing a very turbulent real estate market, since the upward trend in prices registered in recent years has reversed, reaching a drop of 0.4% in the third quarter compared to the same period of the year past, according to the appraiser Tinsa. If the downward slope in prices were also confirmed in the fourth quarter, it would be the first year-on-year decline in this period in the last five years. In this way, “despite the economic uncertainty and certain regulations in areas of the country that paralyze the rental market, good buying opportunities are being produced for those who have a real need to acquire a home”, says the general director of the service company for real estate companies Tecnotramit, Vicenç Hernández.
All these factors are called upon by experts when it comes to explaining why this may be a very appropriate time to buy a home through credit. Among other things, because “the bank streamlines the procedures in the last quarter of the year to take stock and due to the interest it has in closing operations,” says Beyer. “As we do not know what will happen in 2021, securing the mortgage now that they are cheap would be a good option. If the pandemic continues to lengthen, there are new confinements and in turn there is a higher unemployment rate, it is likely that delinquencies will increase and banks may restrict access to this type of loan, ”he highlights.
Assess the situation
In a moment of shocks like this, what remains unchanged with respect to the past is the eternal question about which type of mortgage is better to choose, if the variable or the fixed one. “If your financial prospects can withstand an eventual rise in interest rates without suffering, or you have the ability to repay a significant part of the mortgage in the first few years, a variable mortgage will be more interesting,” summarizes Comesaña. “But, if you prefer to have a fixed fee and maintain your repayment schedule, because you value peace of mind and what you save you prefer to invest in improving your home, traveling or your children’s studies, among other things, the most appropriate mortgage is the fixed ”, he adds.
Beyond this doubt, it is also important to assess the opportunities offered by the situation. “The economy is in a fragile stage whose evolution will depend a lot on the development of the pandemic, which, in turn, will have an impact on mortgages,” says Beyer. “On the one hand, it would be advisable to take advantage of the current low interest rates and not miss opportunities such as those that the market offers us now, but, on the other, it is also possible that prices will continue to fall”, wonders the general director of iAhorro.
Therefore, each user should ask themselves at what specific moment they are. “Consumers who are in a good economic situation and are not affected by the crisis, can take advantage of the decrease in house prices and the drop in interest rates on mortgages, because they will find favorable conditions on the part of the entities of credit ”, assures the vice president of the General Council of the Official Associations of Real Estate Agents (COAPI), Cayetano Rengel. “It will not be like that for those with a more financially delicate profile,” he adds. These could “wait a bit, because housing is going to go down more.” The risk? “That tomorrow that asset will no longer be on the market,” replies Hernández, who, in order to circumvent what he calls the “price trap”, advises “to be clear about the present conditions rather than weigh hypothetical future possibilities.”