Interest rates on mortgages are likely to rise due to inflation, which could worsen due to the economic effects of the war in Ukraine, especially as regards the costs of energy which have a cascading impact on everything else. However, there is a way to avoid it dreaded sting on mortgages: here is which one.
Inflation and rising interest rates
The current level of inflation makes many fear a uncontrolled rise in interest rates on mortgages. However, we have already explained that this increase can neither be sudden nor uncontrolled: after years of low interest rates, a rise in interest rates was in fact already foreseen, and in any case the level will remain for some time well below others. costs we were used to a decade ago.
What is stagflation
Current inflation closely resembles what is defined “stagflation”, or high inflation in a context of economic stagnation. In this context, central banks are not inclined to raise interest rates, so as not to jeopardize a level of investment that is already difficult to keep high. This is why, if it is true that in a situation of very high inflation, Central Banks usually intervene by raising interest rates (to avoid excessive circulation of liquidity and the consequent loss of purchasing power), it is also true that this it happens when inflation has structural reasons, linked to healthy economic growth. Unfortunately, this is not our case.
Mortgage Interest Rates Today
In a context of unlikely intervention on ECB interest rates, therefore, mortgage rates are likely to adjust higher more gradually. As of March 8, both Eurirs and Euribor, the reference for fixed and variable rate mortgages respectively, reported daily increases of +0.03 and + 0.08-0.10 respectively (source: Easy Mortgage). From mid-December to today, the IRS index at twenty has risen by more than half a percentage point: a worrying but not catastrophic signal, which indicates that it is not yet too late to save what can be saved.
How to avoid the mortgage increase
In any case, it is possible to avoid the increase in the mortgage. Considering the existing mortgages, the vast majority is at a fixed rate, so this segment of customers can first of all sleep peacefully. On the other hand, those who have to take out a mortgage today can still choose a fixed-rate mortgage: they will certainly pay something more than those who signed it a few months ago, but they can certainly still obtain very favorable conditions, and above all they will protect themselves from future increases. .
Subrogate the mortgage from a variable rate to a fixed rate
A little less calm are those who have a adjustable rate mortgage, but the solution exists, and is the substitute. After risking oblivion, the loan subrogation it could be the way out for those who want to change their contract from a variable rate mortgage to a fixed rate mortgage, by changing bank, to bring themselves into the situation described above. A further solution could be the renegotiation of the loan with the same bank; in this case there could be some more difficulties, but trying doesn’t hurt.