• Amid war, ECB worries, Spaniards opt for fixed-rate deals
  • This is a major shift away from variable rate mortgages.
  • A similar shift is taking place in Italy, Germany

MADRID, June 16 (Reuters) – Spanish homeowners, fearful of a return of the turmoil that nearly ravaged their country a decade ago, are rushing to protect themselves from rising prices and runaway borrowing costs with new mortgage deals that fix repayment rates.

In a country where, according to Eurostat, about three-quarters of the population owns their own home, most of them have become accustomed to choosing variable-rate mortgages and choosing between competing bank deals as the cost of borrowing in the euro area has reached its lowest level.

New bids are on the rise as house prices rise, but three out of four are now fixed deals as the war erodes confidence and the European Central Bank is ready to raise interest rates while markets are falling.

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They are primarily looking for financial security, said Ignaci Viladesau, chief investment officer at Spanish neobank MyInvestor, and similar shifts are taking place in Italy and, to a lesser extent, Germany.

“You know how much you earn from your job and how much you are going to pay, so it is much easier for you to plan your budget,” Viladesau said.

According to Spain’s National Statistical Institute, in March 73% – or about €4.6 billion – of new mortgages were fixed rate transactions, up from 56% a year ago, although the average interest rate for fixed mortgages at the time was 2.68%. compared to 2.15% for variable deals.

Of Spain’s total mortgage debt of almost half a trillion euros, more than 120 billion are pegged to fixed rates.

Property prices, which rose by 8.5% in the first three months of 2022 – the highest since the third quarter of 2007 – add to the uncertainty.

“It’s all driven by risk aversion,” real estate agent Pablo Rodriguez said.


Fixed interest rates on eurozone interbank loans rose sharply on Tuesday, reflecting rising bond yields and a sharp increase in market expectations for rates this week, and illustrating why the shift in mortgage lending is not just a Spanish phenomenon. read more

In Italy, fixed-rate mortgages account for 85% of new home loans, compared to less than 30% ten years ago, according to the central bank.

In Germany, conservative borrowers have long favored fixed payments but are now delaying them for longer — an average of 14 years, compared to 13.3 years in 2021, according to German mortgage broker Interhyp.

“People are increasingly looking for better interest rates over the longer term,” said Miriam Mohr, Interhyp’s board member who oversees the retail business.

“Many of our customers are concerned. They see interest rates rising and feel some pressure to secure favorable interest rates quickly.”

Interest in fixed-rate deals is also growing in Portugal, although many there prefer to stick with cheaper floating rates, a banking source said.

Rafael Miralles Ponce, of the Spanish consumer group Adicae, says now is not the time for borrowers to put their futures in the hands of the bank.

“It’s like a football match,” he said. “The bank may score the first goal, but then it will be the whole game and I will win by a wide margin.”

($1 = €0.9564)

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Reporting by Jesús Aguado; additional reporting by Tom Sims and Francesco Canepa in Frankfurt, Valentina Za in Milan, Sergio Gonçalves in Lisbon and Lawrence White in London; editing by John O’Donnell and John Stonestreet

Our standards: Thomson Reuters Trust Principles.

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