In a context of high inflation, Spain has hit 7.4% the highest in 34 years, protecting your family’s savings becomes a top priority.
Financial advisers will normally recommend two options to protect yourself against inflation:
- The first one is to buy gold (which is rallying)
- The second is to buy real estate (which is also rallying).
As a result of buyers and savvy investors buying into the real estate market - to hedge themselves against the pernicious effects of rising inflation - property prices in Spain have increased by an average of 8% p.a. (by two digits in coastal areas, such as Malaga).
Moreover, 2021 was the best year in property sales since 2007. We need to go back in time 14 years, to the heyday of Spain’s property boom, to see such great sales numbers (565,523 properties sold).
A frequent question we get asked is: Should a borrower choose a fixed or variable interest rate in their mortgage loan?
The short answer is that in today’s high inflationary context, we strongly advise a borrower chooses a fixed interest rate.
The reason being is because although Financial Authorities the world over are bending over backwards not to increase the interest rates (to protect and secure the fledgling post-pandemic economic recovery), arguing that this inflation is only temporary, the fact is that given recent geopolitical events (read war) inflation is not only here to stay but will significantly increase over the course of the next years.
This translates into an interest rate hike, whether they want it or not, in the near future.
If you have your mortgage loan referred to a variable interest rate, and Monetary Authorities keep raising the interest every quarter over and over again (as it is highly foreseeable) your monthly repayments are going to increase dramatically to the point you may no longer have the financial ability to meet them. Which strongly implies borrowers may default in view of rising interest rates.
For this reason, we recommend to take on mortgage loans with a fixed interest, so no matter what unfolds in the near future (more volcanoes, more pandemics, more financial crisis, more wars, etc) you know exactly how much you need to repay your lender every month. Because peace of mind is priceless.
That said, you should be aware that some enterprising lenders, in view of a foreseeable hike in interest rates, have amended their loan conditions on fixed rate loans, slightly increasing them.
Bottom line, if you still want to grab yourself a (very) competitive mortgage loan with (an ultra-low) fixed interest, you should act quickly and get a move on.
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