Two years if the loan is for thirty years, one if the loan is for 20 years. This is how long those who take out a variable mortgage today will have to wait to pay a lower installment than they would if they chose a fixed rate.
The calculation is based on the trend forecasts of the 3-month Euribor between now and 2030. An exercise not without risks as demonstrated by the fact that only at the beginning of the year a much faster decline in the Euribor was hypothesized, but now we are thinking of a more cautious attitude of central banks, especially since inflation estimates in the Eurozone have been revised upwards. For the comparison between fixed and variable we assumed mortgages with a similar spread (although in truth today banks tend to charge less margin on fixed rates) and therefore, depending on the duration, from 1% to 1.2%.
Here, the tables and calculations to do to understand which type of mortgage is best.
The parameter race: how to control Eurirs and Euribor
The fixed rate is anchored to the Eurirs with a duration equal to that of the mortgage, the variable to the quarterly Euribor. As can be seen from the tables, the twenty-year fixed rate loan involves the payment of an installment of 834 euros compared to 909 for the variable one. In a year’s time, the indexed one will basically balance the account, dropping to 829 euros and in three years’ time (we haven’t gone beyond that) it will allow you to save just over 50 euros compared to the fixed one. In the 25-year loan, the initial gap of 86 euros (724 for the fixed versus 810) will be almost completely filled in one year when the indexed one will drop to 730. In three years the advantage compared to the fixed one will rise to 45 euros, thanks to the reduction of the installment to 679 euros. Finally, at thirty years of age the initial advantage of the fixed income is 100 euros (652 versus 752). In two years the drop in the Euribor will bring the installment to 627 euros and in 2027 it will be reduced again to 618 euros, 34 less than the fixed rate.
The mortgage option that changes on the fly
Having reiterated that we are in the field of hypotheses based on numbers, however, it seems quite clear that in this phase the choice of variable, although it probably does not present great risks of an increase in installments, offers unattractive savings opportunities. An option to evaluate is to take out a mortgage that allows, under clear conditions, to make the switch between fixed and variable (or vice versa)U. In this case you can start at a fixed rate and then evaluate the evolution of the Euribor over time. However, those who have an ongoing variable rate mortgage do not have much convenience in subrogating at this stage. The operation should have been done two years ago and now risks being counterproductive.
