Pedro Sanchez promised that the citizens were not going to pay the mortgage taxes , but that they were going to be the banks. However, the Bank of Spain has warned that banks are increasing the price of their mortgages , and this is clearly a consequence of the new mortgage law .
In recent months, the cost of financing for banks has continued at minimal levels. However, over the past year, average interest rates on new home purchase loans have increased by 30 basis points .
We can ask ourselves: Are the users paying the mortgage expenses with the interest rate that is applied in the loans?
Mortgages have increased on average 0.30 points
The increase in interest rates on mortgage loans has not been observed in other sectors or in the rest of the countries of the European Union. Therefore, this change could be related to regulatory changes in the mortgage law.
According to data from the ‘Spanish Mortgage Association’, the increase by 0.30 points in the cost of an average mortgage of 125,000 euros, taking into account the current Euribor, -0.134 percent, increases the cost of the mortgage by 211 euros at anus.
In other words, without this increase, the client would pay 5,582 euros during the first year and with the increase, he will pay 5,793 euros per year. If the interest rate of the mortgages did not change for 12 years, the cost that the client is paying is 2,532 euros, and if the mortgage is 24 years, the client would pay more than 5,064 euros.
Of these 0.30 points, 0.20 corresponds to the increase in interest rates and 0.10 correspond to the applied bank commissions . After this increase, the average interest rate for new mortgages is 2.4 percent .
The new mortgage law establishes that banks bear the incorporation expenses less the appraisal
According to the new mortgage law, it was determined that the banking entities would bear the incorporation expenses except for the cost of the property appraisal.
The tax on Documentary Legal Acts (AJD) is a tax that is generated by signing before a notary public and registering it in the registry. The tax rate is determined according to the autonomous community, which is normally between 0.5 and 1.5 percent of the amount of the sale.
Before the financial crisis, the mortgage market in Spain was characterized by offering one of the lowest interest rates in Europe in new operations , and this was due to the fact that the main business of banks consisted of linking mortgage customers to other banking products , such as home insurance, and thus profitability was achieved.
Fixed-rate mortgages have entered the Spanish market with more force
However, as of 2008, the price of mortgages became more expensive and exceeded the European average. Between 2009 and 2011, the interest rate returned below the European average, since there was no mortgage market and whoever asked for a mortgage was solvent, so banks fought for solvent customers with low prices.
As of 2013, Spanish mortgage interest rates were in line with our European neighbors. From the middle of 2017 they begin to increase slightly above.
When estimating the cost of the Spanish mortgage, factors such as the risk premium, the delinquency rate, litigation or the percentage of home ownership have to be taken into account … In recent years the higher entry of fixed rate mortgages, with a somewhat higher price.
Only mortgage loans go up
Banks have also not increased the payment they offer to deposits , therefore, this means that there has been no change in the financial sector that causes interest rates to increase .
This change in mortgages in Spain and the rest of the market shows a different situation for mortgage loans. In addition, this change has occurred in recent months, everything indicates that this increase in mortgage rates as a result of changes in regulations.
Therefore, it can be considered that some banks are transferring the costs that customers previously paid , which means that banks are trying to face these new costs by increasing prices, and this is a consequence of the high competition from the sector.