The advice from the experts before signing an adjustable mortgage: how does the initial interest work?

Given the consecutive increases in official interest rates by the European Central Bank (ECB) to contain inflation, those with a variable rate mortgage in Spain have seen their monthly payments increase considerably, even exceeding 200 euros per month. And it is that the Euribor, the main mortgage reference index, has already overcome the 4% barrier.

However, the experts of the financial comparator HelpMyCash remember that most variable loans are not variable from the beginning.

“When a bank grants one of these products, it applies a fixed interest during the first months of the term (between 12 and 24, normally)”. Thus, at the end of this term, the rate begins to be calculated with the Euribor, and may change every six or 12 months, depending on the review.

How interest on mortgages works

Currently, the initial rate when contracting these loans is low, standing at less than 2% on average. As the Euribor is above 4%, if you take out a variable mortgage you will pay a low fee in the first months. But you have to be careful. “If this index continues at high values when your interest becomes variable, your monthly payment could skyrocket to levels that are difficult to assume.”

For this reason, from HelpMyClash they are clear: “The application of that initial fixed rate can be bread for today and hunger for tomorrow”. There is uncertainty about the future value of the Euribor, but short-term forecasts suggest that it will not fall.

“In this scenario, the variable mortgages that are contracted today will become significantly more expensive when their period at fixed interest ends and their price becomes linked to the Euribor.”