Teresa Sanchez VicenteFOLLOW
Updated:09/16/2020 01: 10h
The collateral effects of the coronavirus pandemic have also reached the housing market and therefore, the mortgage market. Today, Spanish banks are redoubling their efforts to recover the demand lost during the months of confinement and are launching attract customers with an improvement in credit conditions. The hooks to get the mortgage firm range from announcing more attractive offers to lowering interest, getting subrogations or promoting advertising campaigns. The experts consulted speak of a resurgence of the “mortgage war” with movements of rate reductions that clearly benefit consumers by the final cheaper of the credits.
The first battlefield is that consisting of lowering fixed rates, which already account for half of mortgages, in order to increase the granting of these loans. “Mortgage credit is usually the gateway to the customer entity, so we cannot ignore the value that this product has for banks, not because of the profitability intrinsic to the product, but because of customer loyalty as well as the contracting of combined products that it entails ”, details Sergio Carbajal, head of mortgages at Rastreator. “We are undoubtedly facing a price war in the mortgage market. This is fought mainly on two fronts: in that of fixed rates, since various banks have lowered their fixed mortgages in recent months, and in that of subrogation, since more and more entities are offering to take on mortgages from other banks in exchange for improving their conditions, ”shares Miquel Riera, a mortgage specialist at the financial comparator HelpMyCash.com.
The drop in rates, however, has been a gradual process in the last decade in both variable and fixed modalities until September 2020 in full pandemic and after suffering a state of alarm. The average equivalent annual rate of the mortgage loans granted in July was 1.92%, which was one of the lowest registered by the Bank of Spain. It should be remembered that in February this rate was 2.06%, according to data compiled by HelpMyCash.com.
“The minimum Euribor price and the sector’s commitment to fixed-rate mortgages – which are around 1.5% – make the current moment the best in the last decade,” Carbajal specifies. “Likewise, the entry into force of the new Real Estate Credit Contract Law provides greater control of the sector and provides additional security to the client. The bank has made a great effort in the last year so that the mortgages that are currently marketed are increasingly cheaper, fairer and less opaque for customers “, specifies the head of mortgages at Rastreator.
«If we take into account data from Rastreator and taking as a reference an entity that has modified its price panel, we can obtain that last April a mortgage of 250,000 euros in a fixed rate modality could be contracted – complying with the requirements determined by the entity- by 1.25% at 30 years. Currently, this same entity can offer the same type of clients rates of up to 0.85% in a 30-year fixed mode. This supposes a monthly saving of 46 euros that when extended to the full life of the mortgage, we obtain a saving of 16,560 euros», Carbajal specifies.
Despite an improvement in conditions, banks are looking closely at the solvency of customers. «It is necessary to have a good profile to achieve attractive conditions, since banks have generally tightened the requirements to be able to access their mortgages », Riera points out.
The branches have also focused on subrogations since there is a mortgage portfolio of clients who were financed between 2012 and 2016 with high rates -mainly variable mortgages with spreads above 1.5% -, such and as explained from the Rastreator comparator. «There is a mortgage war that been fighting for a couple of years. At the beginning, it focused mainly on clients who were looking for financing for the acquisition of a home, but now and after the contraction of the real estate market, entities are focusing on attracting mortgages from competitors, improving conditions and connections, “he says Carbajal.
«The bank has sought and found another way to increase the concession: offer to assume the mortgage loans of the clients of other entities in exchange for improving the conditions», They add, for their part, from Helpmycash.com. From this comparator they indicate that the number of banks that offer this option has multiplied since last May and that among them we can find Bankia, ING, MyInvestor, Deutsche Bank or Caja de Ingenieros, among others.
Other entities propose to the mortgaged contract a new loan with better conditions to cancel the one they have signed at that time. This is the case of Openbank or Banco Santander, since both entities launched offers of this type in June and July, respectively.
The experts consulted say that the entities have deployed two different strategies to attract new clients with regard to products related to mortgages. First, some leave a range of products to the customer’s choice that discount the final interest rate. In other words, the more links are contracted, the lower the rate to be applied and consequently, the resulting monthly fee will in turn decrease. On the other hand, there are banks that, even offering a somewhat higher rate, have decided to eliminate links or bonuses and they only require the opening of a free checking account and fire insurance prescriptive.
“In general, the required link has been maintained, although there are some banks that have increased it. Logically, if banks lower their rates and the Euribor remains low, they need to look for other sources of income, such as products to reduce interest or commissions for early repayment, opening, etc, “adds Riera.
Regarding the contracting of related products, it should be remembered that the law only requires the mortgaged to sign insurance against damages arising from a fire. In any case, the client can choose any insurance company and cannot be forced to do so with the bank. From the General Council of Associations of Mediators remember that the amount of the insurance premium is frequently higher if it is contracted with the bank. Specifically, it is usually 79% higher than that of insurers and, in addition, on many occasions, coverage is offered above the real needs.
In addition, on many occasions, clients are pressured to contract those products linked by the discounts applied to interest rates. Mediators insist that this practice is allowed, although it can never be mandatory.
Fixed rates down
From HelpMyCash.com they reveal that the last entity that has undertaken a cut in its interests in recent weeks has been Openbank, which now offers a discounted interest from 1.30% at 15 years to 1.55% at 30 years. However, the bank asks to domicile the income and sign a home insurance. If these conditions are not met, the interest increases by 0.40 percentage points. BBVA has also entered this war with a never seen interest of 1% if the term is up to 15 years; 1.20% if it is up to 20 years; 1.30% if it is up to 25 years and 1.45% if it is up to 30 years. In return, she asks to domicile the income and take out her home insurance and amortization.
At Openbank they have also opted for mixed rates with their Open Mixed Mortgage, which now has a subsidized interest of 1.45% to 1.65% during the first 10 years and Euribor plus 0% from the eleventh year. In this way, your loan becomes the cheapest in this market.
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