BBVA, Sabadell & Bankinter Raise Their Fixed-Rate Mortgage Rates

2 February 2017 – Expansión

The move comes at a time when fixed-rate mortgages account for 31.8% of all new mortgages signed, according to the most recent data from Spain’s National Institute of Statistics (INE), which corresponds to the month of November 2016. The figure (which includes mixed mortgages) sets a new record and comes in stark contrast to the same month in 2015, when fixed-rate mortgages accounted for just 9.3% of the total.

The move applies to all terms (periods) and involves increases of around 20 basis points on nominal rates and AERs (annual equivalent rates, which indicate the total cost of mortgages).

Bankinter, which was the most aggressive entity when it came to offering fixed-rate products during 2016, raised its prices across all mortgage terms on 15 December, from an AER of 2.82% to 2.96% over 10 years; from 2.94% to 3.10% over 15 years; and from 3.09% to 3.26% over 20 years.

Domino effect

(…). This move was immediately followed by BBVA. It increased its mortgage rates from an AER of 2.72% to 2.98% over 20 years; from 2.98% to 3.24% over 25 years; and from 3.01% to 3.55% over 30 years.

At the time, the bank chaired by Francisco González kept the conditions of the 15-year product the same. However, last month (January), it increased that rate too from 2.50% to 2.76% AER. It was BBVA that took the market by storm last March with its launch of the best fixed-rate, 15-year term, mortgage on the market.

In this way, the rise in fixed rates is being led by the very entities that supported the promotion of fixed-rate products so heavily in the first place. And despite the upwards increases, these entities continue to offer some of the most attractive mortgages in the Spanish market. (…).

The latest entity to have announced rate rises is Banco Sabadell, which has increased the nominal interest rate on its Premium Fixed-Rate Mortgage by 20 basis points. That means an increase in the NIR (nominal interest rate) from 2.70% to 2.90% over 20 years and from 2.90% to 3.10% over 30 years. (…).

In recent months, the price cutting of fixed-rate mortgages had focused on the 10-year and 15-year term products, where this type of product is less attractive, given that over short timeframes, experts recommend taking out variable rate loans in order to benefit from zero interest rate scenarios.

End of an era

(…) With these rate rises, we are now leaving behind an era during which the banks competed fiercely to offer the best conditions on their fixed-rate loans.

The experts agree that the price of these mortgages will not fall to their 2016 levels again. They believe that last year represented a historical opportunity for buyers, who will now have to face tougher demands in terms of prices and conditions – commissions and the forced cross-selling of products.

Original story: Expansión (by Enrique Utrera)

Translation: Carmel Drake