How do I choose between fixed and variable rates for a mortgage?

STEPHANE — Mon, 01 Nov 2021 20:01:47 +0000

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How do I choose between fixed and variable rates for a mortgage?

Should I take a mortgage with fixed or variable rates?

Fixed-rate mortgages and variable-rate mortgages are the two main categories of mortgages you can pick. Of course, there are many other possibilities between the two.

Why would you take a fixed-rate mortgage?

A Fixed rate mortgage has the advantage that whatever the market conditions will do in the future, it will remain the same. To get that advantage, you will on average pay a higher rate than on a variable-rate mortgage, for instance, as of August 2021, mortgages with variable rates were issued at rates of 2.11% while those with fixed rates were issued with 2.7% for an average length of 24 years.

As we are writing, end 2021, Inflation rate is exploding in Spain: the level as of end October is 5,5%.

Why would you take a mortgage with a variable rate?

It could be because it is cheaper and because you don’t see inflation or rates going higher or because you are comfortable financially and can face higher rates. Another reason for variable rates to be cheaper is that for the banks issuing them, it matches their sources of funds (saving’s accounts).
So, to conclude, if you want safety, take a fixed-rate mortgage. If you see inflation spiking or interest rates going higher (in general due to a strong economy) you could as well go for a fixed-rate mortgages. Of course, the longer your mortgage is the higher your risk will be.
Don’t hesitate to ask to your Spanish mortgage broker a pricing with both and compare both offers.

November 2021 update

Due to inflation spiking around the world or due to the worldwide economic recovery (expectations), we see that while a year ago mortgages were initiated with variable rates, the trend just changed in 2021 and accelerated end 2021 so that now, 67% of mortgages are issued with fixed rates (as of August 2021). May be some people see a real risk of inflation spiking, which in turn should increase the variable rates.

Check the evolution of the percentage of mortgages with fixed and with variable rates

Are fixed mortgage rates cheaper than variable mortgage rates?

Check the evolution of the mortgage rates (average, fixed and variable )over the last year

Our other resources on “Spanish mortgage rates”

Looking for a mortgage or a local expert in Alicante, Malaga, Valencia, Madrid, Barcelona,…? Ask us directly!

Stéphane

Senior analyst and strategist at HTBIS

Check the full HTBIS team here

The post How do I choose between fixed and variable rates for a mortgage? appeared first on How to buy in Spain.

Where are foreigners buying Real Estate in Spain?

STEPHANE — Fri, 27 Jan 2017 07:45:47 +0000

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After your reading, don’t forget to read our most updated article of December 2017 on the same topic: The top 10 Spanish cities where foreigners love to buy properties!

Check our full Quarterly Report updated as of December 2017 on the foreign Real Estate activity in Spain.

Full analysis for Spain, for the Costas & Islands and for the different cities

Spain Analysis

During the last year up to September 2016, Foreigners bought 17,4% of all properties sold in Spain according to the “Ministerio de Fomento”.

This is half a percent more than one year ago. Foreigners bought 77 451 properties vs 67436 last year: i.e. a 14,9% Increase. At the same time, the number of transactions in Spain increased from 398 631 to 443 997 last year: i.e. an 11,4% increase.

Real estate analysis for the Costas & Islands: Foreigners buy Sun and beaches!

In our infographic studying second home buying in Europe, one of the top attributes for the ideal property is being near to the sea!

It’s the third attribute after being close to an airport and having a “Scenic Location“. Other attributes are getting a good value, have a good resale potential, have the possibility for renting, have the ideal number of bedrooms, have a minimum size of 100 square meters and of course a hot climate. Check our full infographic below.

So you won’t be surprised by the following statistic: 85% of properties bought are in regions close to the sea: either on a “Costa” or on the Balearic or Canary Islands! If you subtract the sales for Madrid, which enjoy its own international reputation, you get the even more impressive number of 92%!

For sure, Foreigners come for the sunny beaches of Spain. Please check our Infographic for the many reasons why people want to buy a house in Spain.

The “Costa Blanca” is the first “Costa” with 23,4% of transactions, the “Costa del Sol” is the second with 14,2% of transactions and the “Costa Dorada” is the last one with 10,7% of the transactions. All those three regions continue to benefit from strong interests of foreigners. Interesting to note, the “Costa Calida” has a Year on Year growth of twice the average of growth of properties bought by Spain with 30%!

Remember, if you want to buy a property in Spain, you need a NIE, check our paper on that: Your ultimate guide to your Spanish NIE number.

Table 1 Activity by Costas & Islands analysis: Last year up to September 2016.

Real estate analysis for the Spanish Autonomous Regions

No surprise to see that the “Comunitat Valenciana” is the biggest Autonomous Region in term of transactions with close to 30% of the transactions. Andalucia and Catalonia are second and third with 20% and 15%. Check our infographic on this:

Table 2 Autonomous Regions analysis: Last year up to September 2016.

Real Estate analysis for the Spanish Cities

The first city region to be blowing is Alicante with 23% of the transactions done last year! That means that more than 18 thousand properties were bought there.

Malaga is the Second one with 14% of the properties sold and Barcelona is third with 8%. The Growth is impressive and above 10% for all the top 8 Cities. The two strong growth areas in the top 10, in terms of transactions, are Santa Cruz de Tenerife with a 26% growth. The region of Murcia grew by 30%. In the less traded markets, the region of Cantabria, Huesca and Jaen all noticed growth higher than 45% versus the same period of last year.

Table 3 Cities analysis: Last year up to September 2016.