Mixed rates encourage renegotiations of housing loans

Most families who take out home loans in Portugal use mixed rates, not only because they are cheaper, but also because they offer stability in the short term. What has been felt in the market is that families are more active in managing their home loans, renegotiating loans using the mixed rate.

“Given the current offers on the market, the decision to opt for a mixed rate means achieving stability at a lower cost than instability”

Miguel Cabrita, head of idealista/mortgage loans in Portugal.

The most recent data from the Bank of Portugal (BdP) shows exactly that: the average interest rate on new mixed-rate mortgage loans was 2.95% in February, remaining lower than the average interest rates at variable rates (3.45%) and fixed rates (3.60%) – although with an increasingly smaller difference.

“Currently, mixed rates still allow customers to anticipate a reduction in indexes, in addition to allowing them to enjoy stability in the first years of the loans, since they are not exposed to market volatility”, adds Miguel Cabrita.

This is precisely why 7 out of 10 new mortgage loans are taken out at mixed rates.

What has also been felt in the mortgage market is that families are paying more attention to changes in interest rates and are willing to renegotiate their mortgage loans, seeking stability in their home payments, even if only for two or three years. In other words, there is an increasing number of regular mortgage renegotiations, sometimes moving from variable rates to mixed rates, sometimes returning to fixed interest rates at the time when the transition to the variable period (and indexed to Euribor) was planned.

“Renegotiations have become a recurring practice (…) opting to maintain some stability through the mixed rate"

Tiago Vilaça, president of the National Association of Authorized Credit Intermediaries (ANICA)

And, given the high level of competition, banks are also now more open to renegotiating current mortgage loan contracts in order to retain customers.

In recent months, monthly mortgage loan renegotiations have been around 500 million euros. It should be noted that Euribor rates have little room to fall until the end of the year, hovering around 2%, giving less impetus to reducing mixed rates.

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Source: Idealista