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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”

• Your definitive guide to your Spanish mortgage
• Our ultimate mortgage calculator

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

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